start a llc or corporation?

[lozina]

I have an opportunity from one of my previous employers to work as a consultant in another company. I have the option of working there as an employee, as a 1099 employee (?) or as my own business entity. I would like to take the option of using my own company- what are the pros/cons?

If I used my own company, could I also use this company as perhaps something on the side where I buy wholesale goods and resell them?

 

[BrokenVisage]

Enterprise is the way to go!

 

[IceBergSLiM]

Start an LLC. There are no laws that I know of restricting you can only consult or you can only buy/sell. Your business can do whatever it wants to make money(legally).

 

[jdini76]

legalzoom

 

[Descartes]

There are quite a number of differences between a corporation and an LLC. Most smaller companies choose an S-Corp over a C-Corp when considering a corporation. An S-Corp is just a C-Corp in which you have elected S-Corp status. This, like an LLC, simply means that all income to the company has to be dispensed to the shareholders; you can't leave money in the company and declare only capital gains tax, etc.; rather, everything you earn gets taxed to you personally. This is generally called a pass through.

Whether you should go with an S-Corp or an LLC depends a lot on your state as there are some different rules. The IRS is starting to crack down on how people classify wages in an S-Corp, because in an S-Corp you simply have to pay a "fair" salary; that is, a salary commensurate with experience and the market. This opened the door for people to pay themselves a reasonable salary and take the rest as a company distribution, taxed at a much reduced rate. Unfortunately, for consultants, the IRS will classify everything you earn as wages and get you for backtaxes if you ever get audited.

So, the difference between an LLC and an S-Corp for a single person is more about financial strategy than legalese, imo. I'd talk with an advisor before making your decision.

For what it's worth, I have an S-Corp and an LLC. Our LLC is with 3 partners and ~10 employees, and the S-Corp is simply my wife and me. The income that flows from the LLC to me goes through our S-Corp, and it's from the S-Corp that we employ various financial strategies.

Let me know if you have any questions. I've been through this quite a few times.

 

[CPA]

From a tax prospective, LLC may be the better way to go if you expect to incur any loss. The reason is that under an LLC, the IRS allows you to declare either as a Sole Proprietorship (file using schedule C), or an S-Corp (File a 1021). The IRS does not recognize an LLC as a tax-filing business type.

In any case, the big difference between a SP and an S-Corp is, of course, when and how you recognize losses. A SP you can recognize them immediately and reduce other ordinary income. An S-Corp only allows you to recognize loss against Corporate income. Therefore if you incurred a loss, your Corp taxable income will not be less than zero and you can only apply the loss to future year's income. Not knowing whether your "company" will continue in the future, I would prefer to recognize loss immediately, unless you don't expect to have any other ordinary income.

 

[Pugnax]

Originally posted by: jdini76
legalzoom

Hmm...Do you know if they allow you to incorporate in a state you don't live in? I think you need a resident agent or such. Looks cool otherwise.

 

[CPA]

Originally posted by: Pugnax

Originally posted by: jdini76
legalzoom

Hmm...Do you know if they allow you to incorporate in a state you don't live in? I think you need a resident agent or such. Looks cool otherwise.

yes, you can, and it's usually very simple and inexpensive.

 

[IceBergSLiM]

Originally posted by: Pugnax

Originally posted by: jdini76
legalzoom

Hmm...Do you know if they allow you to incorporate in a state you don't live in? I think you need a resident agent or such. Looks cool otherwise.

yes you can the resident agent would basically be the attourney who files the paperwork for you.