# Are you all a LLC, S-corp, C-corp, etc...???



## LYO37 (Oct 27, 2007)

For all of you who own your own t-shirt business, I'm just curious to see if you created your business as a:

LLC?
S-Corp?
C-Corp?
other

Let me know because it seems that I am leaning towards a LLC.
I am the only owner, want protection of my personal assets, and would love the freedom from complex paperwork/rules that other Corps. have to follow.

THanx!


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## agerundajr (May 30, 2007)

We went LLC. We used The Company Corporation (Incorporate Your Business With Online Incorporation Services From The Company Corporation) to help with the set up. What state are you in?

Artie


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## LYO37 (Oct 27, 2007)

I'm in NY. I want to mainly sell my shirts off my website. I am actively promoting my site now which is not even up and running yet. 

LLC appears to be my best bet. I am still curious on what happens if I sell my products from my site to all Non-NY residents. How do I collect taxes?


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## agerundajr (May 30, 2007)

I believe that you only need to collect sales tax from orders that are shipped to NY.

You should know that in NY you will be required to comply with the NY Publication Law. Google it and learn the details of this law. It'll cost you some dough (around $750 - $1000 depending) and I believe you have 120 days from the date of incorporation.


Artie


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## BoelenPython (Nov 22, 2007)

if ur the only owner you can stay a sole P, or LLC and have it taxed like a sole P, which you would do the busiess taxes with ur yearly personal taxes, or you can do an LLC and tax like an S corp.. All very easy.

u can do this urself and save money..


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## karlking85 (Sep 26, 2007)

You should probably be fine with an LLC.....as long as you understand that that does NOT stand for Limited Liability CORPORATION. So many people I talk with seem to think that LLCs are corporations, which they are in fact somewhere in between a corp. and a Sole Proprietorship.

The only real disadvantage of LLC's is that being fairly new in the business world, they are still changing and laws being rewritten all the time. They are also recognized differently I believe in different states. But as long as you do your research, you should do fine.


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## LYO37 (Oct 27, 2007)

If LLC does NOT stand for limited liability corporation, then what does it stand for?


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## karlking85 (Sep 26, 2007)

Oddly enough, Limited Liability Company. I thought the former for a long time myself. It is still confusing as an entity because the government frankly is still testing the waters on how it should be treated, ie., as a corporation or a sole p. with better protection. I wouldn't be surprised though if it does begin to resemble a corporation more and more as time goes by.


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## karlking85 (Sep 26, 2007)

Here's a link with a bit more information on the entity:

Questions answered about LLC (L.L.C., Limited Liability Company)


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## binki (Jul 16, 2006)

I wrote this a while back: http://www.t-shirtforums.com/t-shirt-articles/t17054.html

You can also check out Ker$tetter Letter® and Tax Guru-Ker$tetter Letter 

While every structure has its benefits and downsides we found the C-Corp to be the best vehicle for us.


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## rrc62 (Jun 2, 2007)

A C-Corp is better if you're planning on going public, but for a privately held company, LLC or S-Corp is less expensive to maintain. I've always been an S-Corp because past businesses involved higher risk products and activities. The T-Shirt business is pretty low risk so I went Sole-P. 

In this business you are not likely to get sued for things that are out of your control. You might get sued for breach of contract of something like that, but that is something in your control and totally avoidable in the first place.


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## Schizm (Nov 1, 2007)

I formed an LLC but recently went to S-Corp. Tax benefits are there with the S-Corp.


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## BoelenPython (Nov 22, 2007)

i agree.. C corp has a double taxation. LLC flow thru s corp or LLC taxed like a sole P is probably the best road for 90% of the people here.

Just remember, if you have 1 or more partners, form and LLC and DO a partnership agreement. You can find the forms etc online.. Its a must, even for friends..

good luck.


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## Unik Ink (Nov 21, 2006)

S-Corp. More paperwork and tax filings, but saves you money.


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## binki (Jul 16, 2006)

BoelenPython said:


> ...C corp has a double taxation...


please explain what this means.


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## rrc62 (Jun 2, 2007)

A C-Corp is taxed as a separate entity. You pay corporate taxes on the business plus personal income tax on whatever you drew as salary. In most states, the coporate tax rate is higher than personal tax rates. S-corp and LLC are not treated as a separate entity. The company income is taxed on your personal tax return at the those tax rates.


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## binki (Jul 16, 2006)

rrc62 said:


> A C-Corp is taxed as a separate entity. You pay corporate taxes on the business plus personal income tax on whatever you drew as salary. In most states, the coporate tax rate is higher than personal tax rates. S-corp and LLC are not treated as a separate entity. The company income is taxed on your personal tax return at the those tax rates.


That answer is completely wrong. Salaries are expenses to the business and are not taxed.

I am still waiting for someone to tell me what double taxation there is on corporate profits.


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## Schizm (Nov 1, 2007)

binki said:


> That answer is completely wrong. Salaries are expenses to the business and are not taxed.


That is correct........


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## rrc62 (Jun 2, 2007)

binki said:


> That answer is completely wrong. Salaries are expenses to the business and are not taxed.


That's not what I said. I said the corporation pays corporate taxes and you pay personal taxes on the salary you draw from the business. Of course salaries come off the gross corporate income and taxes are paid on net. 

If you've found a way to avoid paying personal income tax, I'd love to hear about it. 

Regarding double taxation...you are not being taxed twice on the same income, but you are paying a higher corporate tax rate that you would be if you were an S-corp or LLC. Corporate income would be taxed at the personal level.


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## karlking85 (Sep 26, 2007)

Exactly! I was just about to post the same thing. It's not the expenses that are being taxed (DUH!) but the income. And as near as I am aware, the only way to avoid double taxation is to reinvest back into the corporation, thus not realizing a taxable profit. 

I think Fred and Jason just misunderstood your post, because you had it exactly right.


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## binki (Jul 16, 2006)

You mis-understand double taxation. Double taxation has to do when after tax corporate earnings are distributed as non-deductible dividends to shareholders. That is double taxation. Your salary that is drawn from the Corp. is not taxed at the corp level because it is an expense to the corp. It is taxed on your personal income tax forms. Add to that about 15% for Social Security and other garbage the government wants. 

Now, on to income tax rates.

With an S corp or LLC the shareholders or partners are *required* to take as income their share of the profits from the company. Not so with a C-Corp. A C-Corp is the only structure that can have retained earnings.
Section 179 expense election can be used by a C-Corp but not by an S or LLC. Having just one C-Corp means you can split your purchases between different entities and magnify the deductions
C-Corps have a lot of non-taxable benefits that are allowed only under this structure. One of these is 100% coverage of heath care costs beyond insurance payments/premiums.
Finally, If you had $100,000 in income in an LLC or S corp, your tax rate would be for 2007 $17K + $15K for FICA. With a C-Corp you could split that as $50K for you and leave $50K as retained earnings and pay just $6700 + $7K for FICA on your 1040 plus $7500 on your 1120 for a total of $14,200 Plus $7K for FICA saving nearly $11,000 in the process. (numbers used are for married filing jointly)
C-Corps also have the ability to have a fiscal year ending in any month so the ability to smooth out income over time longer than 1 year is available to the C-Corp as well. 

References: 
1120 Tax Rates
1040-07


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## treadhead (Jul 26, 2006)

Sole P here.....


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## txhija (Nov 28, 2007)

LYO37 said:


> For all of you who own your own t-shirt business, I'm just curious to see if you created your business as a:
> 
> LLC?
> S-Corp?
> ...


When you decide go to LegalZoom.com to do the actual filing. They are a highly recommended site for doing all sorts of legal documents. They save you money because the work is done by paralegals and just reviewed by an attorney (which is the way it usually happens in a regular attorney office) so you save BIG $$.


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## mk162 (Sep 24, 2007)

Or, hire an accountant and get his advice. It's what we did and it has worked out very well for us. Right now we are an S-corp and we will be changing to an LLC. This will serve 2 purposes for us. 1 is the taxation and the legal umbrella, since there is less laws governing an LLC, there is more flexing in the system. And, since I am buying the company next year and we are changing the name to Repla Prints, LLC it is viewed as a different company and I can therefor take full depreciation on all of our equipment..again. Works well huh? Should save me some money.


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## karlking85 (Sep 26, 2007)

binki said:


> That answer is completely wrong. Salaries are expenses to the business and are not taxed.
> 
> I am still waiting for someone to tell me what double taxation there is on corporate profits.


I think I must have read his post fast before because I see what I was missing before. I don't misunderstand double taxation at all. But I did miss the last half of his post which is way off. You don't pay corporate income tax on your own personal tax return, you do pay tax on your dividend. The company pays the corporate income tax. And Fred, you're right, salaries are an expense, of course, so they are not taxed. 

Sorry, I just misread his post before.


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## binki (Jul 16, 2006)

Good deal, dividends are taxed once at the corp level (non deductible expense) and once at the personal level, however, you do not pay FICA on dividend payments, a 15.3% savings right there and your tax rate on dividends may be at a lower tax rate than your personal rate. In any case, this is not a reason to not have a C-Corp since you can have any number of non-taxable benefit plans in a C-Corp that is not allowed under any other entity.


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## karlking85 (Sep 26, 2007)

Exactly. There are alot of advantages to using a C-Corp, it definitely makes sense to check all the pros and cons before waiving the idea of setting up a corporation. I will be starting out as a sole p, but I plan to expand into a c-corp as soon as business justifies.


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## bigredsfire (Jan 7, 2007)

> Section 179 expense election can be used by a C-Corp but not by an S or LLC. Having just one C-Corp means you can split your purchases between different entities and magnify the deductions


This is not correct. An LLC can use 179 deduction. The IRS doesn't care if you are an LLC. You file your tax return as a sold proprieter or as a partnership. There is no LLC return to file with the IRS.


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## binki (Jul 16, 2006)

bigredsfire said:


> This is not correct. An LLC can use 179 deduction. The IRS doesn't care if you are an LLC. You file your tax return as a sold proprieter or as a partnership. There is no LLC return to file with the IRS.


I never said an LLC couldn't claim the 179, just that a C-Corp is a recognized entity and can have its own election. 

An LLC is a flow through so while you can use the 179 as an LLC you can only use it once a year. A C-Corp is a separate entity so it can have its own 179 election as well as any other entity that you have control over effectively increasing your election amount by a factor equal to the number of entities you have. At the very least having a C-Corp allows you to take the election twice (not for the same equipment) doubling your available equipment purchase power that can take advantage of the 179 election.


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## Attitudes (Oct 3, 2007)

I have found that I would rather pay a professional I trust, than try to learn everything my Attorney and my CPA went to school for.

The advice I can give you is to find professionals who have other clients that are in the same business as you are.
You pay for a “system” that works, not for them to learn the ins and outs of “your” business.

As for me and my partners, my current situation is quite different. your milage will certainly vary.

3 LLC’s wrapped in a C, all Nevada (can be used in any state)
Your professional will tell you why..... 

I’m told I need to look into an IBC next, More $$$ than I want to think about. 
Maybe that's why I got interested in t-shirts, much simpler...

Don


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## SeasonEnds (Sep 9, 2007)

binki said:


> any case, this is not a reason to not have a C-Corp since you can have any number of non-taxable benefit plans in a C-Corp that is not allowed under any other entity.


So what is the downside to owning a C-Corporation for a small business?


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## binki (Jul 16, 2006)

I can't think of anything. If you start to sell common stock to people you will have to keep track of that, but pretty much not too much else. 

In some States you are taxed on the amount of stock shares authorized so your mileage may vary.


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## VirtualIsland (Sep 22, 2007)

I'm an LLC in florida ,but also have a couple LLC. in Delaware which was pretty easy to do online,you just have to have a agent with address in DE.The fees are min. so you can do it.


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## karlking85 (Sep 26, 2007)

The only disadvantages I can think of when it comes to running a C Corp is the slightly higher cost and the more stringent paperwork and bookkeeping procedures. To me this isn't valid enough reason NOT to launch a corporation though, merely notes to consider. 

The truth is, there are several pros and cons to every business structure, it's just a matter of deciding which form to choose. I am actually surprised that so many have such a difficult time with this step. I guess it's just because there are so many things to take into consideration before making the call. 

One of my favorite authors, and Harvard graduate/professor, Bob Adams once made the comment, "when in doubt, incorporate." He cited that there are more reasons to incorporate than there are reasons NOT to. 

Just weigh it all out and as what your business' needs are going to be.


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## kikkoman (Oct 30, 2007)

For anyone looking for samples of partnership agreements. Check out this link I just came across. Very Helpful!!!

Partnership Agreement and Operating Agreement

Pass it around

-D-


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## MichaelCon (Dec 15, 2007)

so you can start your business as a c-corp even if it is just a small start-up???


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## ChristyC (Feb 12, 2008)

Check your state law. In California, you pay a minimum tax of $800 to the Secretary of State each year for the priviledge of being incorporated... (Not so in many other states.)


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## bastardnfriends (Feb 19, 2008)

> For all of you who own your own t-shirt business, I'm just curious to see if you created your business as a:
> 
> LLC?
> S-Corp?
> ...


We started as a sole proprietor and now we are an S-Corp.


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## Rodney (Nov 3, 2004)

badhoha said:


> Ok. I don't know if I need to start another thread on this but my question is, what are the benfits of filing in DE or NV while based in say, CA? Is it the min. $800 tax that they don't have?
> 
> Thanks.


Yes, it is generally best to start a new topic for your new question


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## fizzlecrow (Aug 10, 2011)

Thank you for this link Daniel it was exactly what I was looking for.


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## 4theTeam (Feb 21, 2011)

I own 2 LLC's and 1 S-Corp in the State of MN.


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