For tax purposes, is it better to be listed as an individual LLC or to be submitted as a corporation LLC?
Posted on September 22, 2008 by admin
rko99 asked:
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.
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.
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.
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.