My website developer was nice to me when she suggested that my newsletters needed more searchable words. I assumed she meant that my newsletters should have more topics like LLC versus Inc what should you choose? Or, Subchapter S and C what is the best? Or Real estate contract top five mistakes? Or Will or Trust what is right for you? Or, POA or AMD what are these letters? Or Surveys and title insurance what is the deal?
These topics are valuable and I am sure the bots, the Google or the Gram catches these words for that special algorithm. So I will indulge and write about a hot topic that forms a consistent question for clients. Which type of company structure should I choose? Inc or LLC?
First of all let’s get clear about the two forms. Simply an INC is a stock company with stockholders that vote a President and other officers to run the company per company bylaws. An LLC is a membership of people that agree to operate the company by a manager via an operating agreement. Second, the INC is a more formal structure than an LLC because corporate meetings need to take place annually. Some people prefer the set it and operate form of an LLC. Third, my preference is that my client’s with businesses that interact with the public select a more formal organization like the INC while real estate holding entities would be more LLC.
Let’s end this short newsletter with some clarification:
1. All INCs must “elect” to be treated as an S corp because all INCs are C corps unless otherwise elected. This means that each INC will pay corp taxes unless the IRS is informed that the owners of the INCare electing to pay the taxes at the owner level not at the corp level
2. NEWSFLASH there is no such thing as an S corp like you have incessantly heard about but rather an INC that has elected to be taxed as an S corp instead of the default C corp thus choosing to not pay corporate taxes at that level
3. LLC’s can elect S corp status.
4. IF you have an LLC but you don’t have an operating agreement then you own a car without an engine.
Albert R. Hartley