Dpeper - 8:09 pm on Oct 5, 2005 (gmt 0)

Well there are several diffrences between the two as far as taxes go.

An LLC is considered a flow through entity which means that all income flows through to your personal tax return and will be taxed at your marginal rate plus fica. And you can not expense your wages. Basically income is taxed as an individual. This is the IRS personal tax bracket [irs.gov...]

A C corp (inc) is not a flow through entity, you can pay your self a resonable wage which is still taxed at your marginal but is deductible for the company, against the companies income you still have to pay fica (medicare, and social security) and your wage will still be taxed at your personal marginal, just like a regular pay check, then income of the corporation that is left over is taxed at the corporate rate, and you can pay dividends out to your self which are only taxed at 15%. Or the corporation can hold the earnings left over after taxes. (I couldnt find the corporate tax schedual for 2005)

They both offer protection of personal assets against creditors, etc... as long as you have not personally guarnteed anything. Another thing to look out for is if you miss use an LLC is can get classified as an alias by the IRS which will pretty much cause you to lose your liability protection.

This link explains quite a bit...

[irs.gov...]

In the end it all comes down to planning you need to have a grasp on what your gonna make and run the scenarios to come up with which way will have the least tax liability.

Government sites about it are the best to use! The IRS site is actually really user friendly.

As always this info is just my opinion and you should all ways see a tax professional, before making any decisions, as they will be able to inform you of the exact laws and regulations that are applicable.