Before I pay hundreds of dollars to ask this question to a lawyer, I am wondering if any one knows about this subject. Don't worry I will not take your opinion as a legal advise.
2007-02-27 05:15:19 · 6 answers · asked by Belle 2 in Business & Finance ➔ Corporations
Belle,
The steps are to file articles of organization (LLC) or articles of incorporation (S-corp or C-Corp) and pay the filing fees with the Secretary of State in the state you wish to have the company domiciled. To get the specific steps in your mind before you speak with an attorney, go to Borders or Barnes and Noble and review the book on setting up a corp or LLC. It will either tell you the costs or direct you to websites where you can get them.
The type of organization question depends on a number of factors.
A sole proprietorship has the least amount of expense and headaches to setup and operate, but the also the least amount of liability protection. If you go bankrupt as a SP you must declare personal bankruptcy. Income and losses are taxed to you personally and also completely subject to Self Employment tax of 15%.
A partnership is similar to a SP except it has more than one owner. In addition, you are personally liable for your partners actions and any and all liabilities of the partnership and vice versa.
An LLC offers liability protection and is an organization that is more difficult to set up and operate than an SP but less than a Corporation. Income is taxed on your personal tax return as a "pass through". These taxes may be higher if you have income right away, but if you have losses they are deductible against ordinary income on your tax return. Self employment tax is due on your salary, but not necessarily on company profits.
An S- corporation has the same tax status as an LLC but is more complicated to setup and operate. If offers liability protections.
A C-Corp is the most complicated to setup and operate, but income is taxed at the corporate rates which can be less than the personal rates. If you sell assets from a C -Corp and then want the money for yourself, it will be taxed twice - once in the corp and once personally. But if you sell the entire business, you get the lowest possible tax rate, capital gains tax, currently 15%.
In short if you will have early losses and need liability protection do an LLC. If you will have a substantial business with lots of profits especially early on, do a regular C Corp. If you're dabbling here and have no real expectation of a meaningful business - do a Sole Proprietorship.
Good Luck
Dana B.
2007-02-27 09:30:12 · answer #1 · answered by planningresult 4 · 0⤊ 0⤋
Change Sole Proprietorship To Corporation
2016-12-08 22:04:32 · answer #2 · answered by ? 4 · 0⤊ 0⤋
You either need to talk to a lawyer or an accountant (accountant might actually be cheaper). There are different types of corporations you can change into depending on your needs (tax-breaks, protection from personal liability, etc.) I do know you will need to get a different EIN than you are using now (if you are using one). Most accountants like their clients to switch over at the beginning of a new Quarter to make it a little cleaner financially.
You might want to look on your state's website for information - Pennaylvania has a Corporation Bureau, but I don't know what other states do.
2007-02-27 05:24:52 · answer #3 · answered by Quarter Midget Mom 5 · 0⤊ 0⤋
Best bet is to check the Secretary of State's web site for your state. In many States, you can fill out the necessary forms on line.
2007-02-27 07:26:20 · answer #4 · answered by WJVV 4 · 0⤊ 0⤋
Yeah, tell them Spud told you so. Just fill out the paperwork and file them with the state.
2007-02-27 05:18:50 · answer #5 · answered by Spud55 5 · 0⤊ 0⤋
you have to file papers. I used to have a subchapter s. the way to go now is LLC. check online sites such as legalzoom.com. you can get it done very inexpensively.
2007-02-27 05:20:10 · answer #6 · answered by Anonymous · 0⤊ 0⤋