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You don't mention what type of "work" you are doing for your business, which can have a major impact on how to structure your business.
For our part, we setup a C-Corp. (We do online reservations, web development/design, affiliate programs, AdSense.) At the time of setup, one of the shareholders was not a U.S. citizen/resident, so an S-Corp was out of the question. It also helps us get some other tax perks that are denied or limited to S-Corps with few employees.
It also helps us get some other tax perks that are denied or limited to S-Corps with few employees.
Asia, I would be interesting in hearing what some of these are. I currently run my company in an LLC and have debated moving it to an S-corp, but I would be interested in hearing if what tax perks I might be missing if I do that.
See IRS PUB-15 and PUB-15B for the specifics.
The downside is (1) a whole lot more paperwork each year (2) you will probably spend more each year for accounting fees.
If you decide to incorpoate, I would suggest doing some research and reading on 'piercing the corporate veil'. If you don't understand the concept, your personal assets are still at risk.
By the way, don't underestimate the sleaziness of lawyers out there. You can be pure as new fallen snow and careful to the point of obsession and some sleazeball lawyer can still institute a lawsuit... Proper incorporation will help protect your home, bank aco#*$!, retirement and other personal assets.
IMHO sole proprietor is not a good solution for many.....an LLC, S-Corp, or C-Corp are the sensible options.
Which of these 3 you choose will depend upon a number of things. Some of which you probably shouldn't/wouldn't want to discuss on a public forum!
It will also depend upon the State that you live in.
You really should get local professional advice on this subject. :)
After a huge amount of research, I chose S-Corp....but, that might not be best for you. I doubt C-Corp will be either, so probably weighing the pros and cons of LLC Vs S-Corp in your State is the thing to be concentrating on :)
Would I be taxed less at the end of the year?
Every situation is unique and there is no one-size-fits-all answer, except "Consult with your tax preparer for your specific situation".
What exactly are the benefits of incorporating?
The main benefit is that it creates a separate legal business entitity so if you get sued you can't lose your personal assets like your house or your personal savings. Your liability is limited to the assets of the business, which can be kept to a minimum. If you have a large amount of business assets, you can split them up among multiple business entities, each with limited liability. Then if one business gets sued your personal assets and the assets of the other entities are generally protected from liability.
There can be a lot of creative tax benefits as well, depending upon the type of entity you choose to form.
From what I've heard, it's a legitimate strategy but you can't bring profits back to the US without being taxed on them. I'm wondering if anyone has done this and how much hassle it was to set up this business structure.
I'm wondering if anyone has done this and how much hassle it was to set up this business structure.
It is a HUGE hassle and the IRS has created so many rules to stop this type of stuff that you would spend more in legal fees and accounting advice just to set it up that you might as well pay the extra taxes.
I looked into this and both my attorney and accountant said it would only make sense to explore this if I was bringing in millions and millions of dollars a year and only then if I did a substantial amount of business outside the U.S. as well, where I could move money around to get the most tax advantages. This is one section of law that is very complex and the IRS insures it stays that way.
Here's a mellificent little quote* taken from teh InfarWebs [assetprotectionbook.com] right now:
The LLC acts of Delaware, Iowa and Oklahoma provide for the creation of separate protected “cells” (‘series’) within one limited liability “container” (the series LLC) without the need to create separate entities, thus avoiding the inefficiencies associated with multiple related entities.
Ahh, yesss... I can feel the litigation sliding off my slick, loophoiled** corporation as we speak. The veil of asset protection... she is so lacy and beautiful that I am lost for words.
Basically, in Leigh-man's terms***, if you're looking for the ability to set up separate entities (websites) with different purposes and monetization strategies, there's nothing more salacious to the palate than the Series LLC.
Oh, and if you decide to get one- get one in Delaware. I'm not going to tell you why. It's a surprise.
*: No, mellificent is not a real word. So don't even bother Googling it. There's nothing useful to be found there. And if you already googled it, well... sucks to be you, I guess.
**: Loophoiled- Protected from the iron fist of the law with an artfully selected/crafted assortment of loopholes, in a manner not unlike a ball bearing covered in vegetable oil is safe from even the cleverest of infant children. I declare a trademark on this word, effective immediately and with ALL rights reserved (even the loophoiled ones).
***: Terms used by the lovely and voluptuous Rachael Leigh Cook [imdb.com].