LLC or INCORPORATED???

Question

so tell me which should i do LLC or Corporation??? What exactly are each of these? It is for an apartment investing business. I am the only owner, but I do not want to mix my business things with my personal things.

Answer 1

It really depends on how you want to handle taxes, how you want to shelter retirement, etc. There is no single answer for everyone. Check with a local accountant. My accountant advised for me to go with an s-Corp.

Answer 2

An LLC stands for limited liability company.

LLCs and corporations are creatures of state law -- so the exact nuances of each are governed by your particular jurisdiction or the jurisdiction in which you choose to incorporate.

Corporations have a much longer history than LLCs -- they have been around since before the US. In the US you can further have a standard C corporation or, if you make a filing promptly after formation, you can convert your C corporation into an S corporation.

Small businesses (like yours) generally choose between an S corporation and an LLC. Both are superior to a C corporation in terms of taxation (a C corporation is taxed as a separate entity and then you have to pay taxes when you dividend money out) but they do have slightly different tax attributes. Different states have different sort of state level taxes (such as gross receipts or net income) on LLCs or S corporations.

In terms of limited liability and the segregation of assets, both LLCs and S corporations will provide it. An LLC requires less formalities over time -- unlike a corporation you do not have to have an annual meeting to elect directors, you do not need to worry about share certificates, etc. In addition, LLCs generally allow for significant flexibility in ownership rights, distribution rights, etc. (for instance you can admit a partner into your LLC and say that you'll share 50/50 in the distributions but that you control 100% of the voting) that S corporation can not. However, the downside of the LLC is that there are very few "default" rules on how to manage an LLC -- you are supposed to have a separate written operating agreement that sets out those rules -- this means that in disputes with partners if you have failed to draft a good LLC agreement that a lot of situations will not be clearly dealt with (in contrast, corporations are largely governed by statute and there is long and well established case law that dictates how disputes are resolved).

If you don't plan on having future partners, I agree that an LLC would seem to be a good idea. You should definitely talk with your accountant/tax advisor and let them know you are forming a single member LLC (and if they don't know what to do with that or they don't know that you get to treat it as a disregarded entity -- get a different advisor ...).

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Answer 3

LLC all the way!

A LLC is similar to a corporation, and is a more flexible form of ownership, especially suitable for you, being the sole owner. There are more tax benefits, less government interference with your environment, less paperwork and no liability when it comes to your debts or your company's malpractices.