For tax purposes, is it better to be listed as an individual LLC or to be submitted as a corporation LLC?

Question

I'm starting a small business where I'll be the single owner of an LLC with no employees. I've been trying to decide if it's best to keep my LLC as a sole proprietor or fill out the forms so that I am considered a corporation. The government treats individual llc's as a sole proprietorship where the individual is responsible personally for the company's debts and liabilities. But I thought having an LLC keeps me from being liable for my company's debts and liabilities. I guess I'm kind of confused about how the taxation process goes for LLC's. If someone could help explain how that works and also to give advice as to which is better, the individual LLC or LLC as a corporation, I would greatly appreciate it. Thank you.

Answer 1

You can't have a "sole propietorship LLC." An LLC (Limited Liability Company) is closer to being a corporation than a sole proprietorship.

A limited liability company is an attractive business structure because it gives you the protection of a corporation (you can't be personally sued for obligations of the LLC, except in cases of gross misconduct or fraud). However, the LLC tax structure is flexible. The LLC can elect to be taxed as a corporation or the tax liability can "pass thru" to the owner, much like an S-Corporation.

A sole proprietorship puts you on the line for any obligation that your company incurs. In the eyes of the law, there's no difference between a sole proprietorship company that you own, and "you."

As far as getting loans and credit instruments, you'll find that most banks won't lend to a corporation or LLC without the officers personally guaranteeing the loan...so you'll still wind up being liable for debt. The LLC is very nice, though, if someone sues your company for something that you did or didn't do. I made the mistake of NOT forming an LLC and running a sole proprietorship, then lost a lawsuit and I'm still reeling from the effects of that lawsuit today.

Answer 2

I thought that LLC , Limited Liability Corporation, was more for a protection against being sued ?

You are limited in how much you can be liable for ?

I suggest you speak to an atty ... and to an accountant.

the accountant would probably be your best bet for advising you on the tax pros and cons.

Answer 3

As an LLC OR an LLP your "default" type with the IRS would be a Subchapter ok or 1065 submitting entity. whether, in case you decide directly to document an 1120S you are able to document an 8832 and opt to be taxed decrease than Subchapter S. (you additionally can opt to be taxed as a C-corp yet I haven't any thought why you may opt to try this except you intend to circulate public sometime :-)) except you're in Florida i will no longer probable remark on your entity decision by using fact your legal duty secure practices (or loss of it) is dictated via your state statutes. in case you probably did no longer have professional suggestion on an identical time as making your entity decision you will desire to no longer less than get right into a Small corporation administration workplace so as that somebody regionally provides you the modifications in legal duty secure practices on your state to your entity options. sturdy success with the hot corporation venture!