Corporation vs LLC
There is very little difference between corporations and LLC's. In either case, you typically want to be taxed by the IRS and subchapter-S
Attorney Tom Olsen: Megan you are on News 96.5, go ahead.
Megan: Hi there, I have a question. I am getting ready to file for a small business, and from what I understand being a single owner operator, I'm starting a cleaning company, it is better for me to file corporation. I have decided to file S with IRS of course escort for the lower taxes. However, I was looking at LLC prior, and I'm kind of lost on how to set up the shares. From what I understand I can have 100 shares, but I don't really understand what that does to create a business.
Attorney Tom Olsen: Megan, first of all, incorporating or becoming an LLC for you, good idea. I encourage you to do it. For you whether you're a corporation or whether you're an LLC, doesn't make a whole lot of difference. The important thing is that once you become a corporation or an LLC, you apply to the IRS that you want to be taxed as a subchapter-S corporation, that's where your tax benefits come in.
Megan, whether you're a corporation or LLC when you file those documents, typically you tell the secretary of state how many shares there will be in this LLC or corporation, let's say there's a hundred or let's say a thousand. So whatever number of shares you pick, you would take that entire amount of shares and put them under your name.
Megan: Okay. Does the number of shares I pick determine how much I pay in taxes or how does that work?
Attorney Tom Olsen: No, it does not. No matter what, you're going to be the sole shareholder in this corporation or LLC, and when you become a subchapter-S corporation Megan, remember that the corporation will file its own tax return but it will not be paying any taxes. All the profits and losses from this corporation or LLC will be passed directly onto your personal tax return.
Megan: Thank you.
Attorney Tom Olsen: All right. Good luck to you Megan.