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Should You Form a Corporation or LLC Before Year's End?
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Dec 2010
If you’re ready for your business to become a corporation or a limited liability company (LLC), the best time for you to start the process is most likely now before the close of 2010. Why? Quite simply, in most cases, the sooner you can begin taking advantage of the benefits of becoming a corporation or LLC the better. There are other considerations, though, so read on.
Limited Liability
Assuming you follow the formalities of running a company, one of the most significant advantages of incorporating or becoming an LLC is that you are no longer personally liable for the debts of the business. With a corporation, shareholders are not personally responsible for company debts whereas an LLC, “members” have limited liability.
Accordingly, if it is imperative that you protect your personal assets because of company debts, you probably should consider pushing ahead on the paperwork to make your business a corporation or LLC as soon as possible.
Tax Considerations
Tax considerations may also weigh in favor of forming an LLC or corporation before year’s end. With an LLC, income and losses can be passed through to members; forming a corporation could mean significant self-employment tax savings.
On the other hand, if you incorporate or become an LLC now, you will be responsible for filing tax returns for the company as well as for the sole proprietorship the business was for the other part of the year; in that sense, if you don’t want to make your business a corporation or LLC immediately, you should at least have everything ready for January 1 to avoid double the paperwork the following tax year.
That said, it is important that you weigh the tax consequences and money savings against the potential hassle of filing more returns; it just may be that the paperwork hassle is financially worth it now.
The Paperwork
Speaking of paperwork, do consider, though, that getting through all the paperwork for filing for LLC or incorporated status could take some time, so the earlier you start, the better, especially if you want to have everything completed by December 31.
If you’re ready to take the next step, but not sure whether a corporation or LLC would be better for your business and/or when you should file, consider your choices carefully. Both corporations and LLCs have their own advantages and disadvantages, so it’s important to evaluate your particular business, operational needs and tax strategy to make the best decision for you.
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Comments
Submitted by on Nov 22, 2010 - 12:00AM
I am thinking to open small transportation business or small trucking company which will transport loads for my existing company that i have, plus to provide small moving services for other businesses, so can I have more information on which business formation would be better, Corporation, LLC, or something els.
Thank you.
Submitted by on Nov 22, 2010 - 3:30PM
Hi Vlad,
Per your request, we have provided several links below that provide general information about Corporation, LLCs, and some of our other popular business structures:
http://www.legalzoom.com/incorporation-guide/corporation-llc-comparison....
http://www.legalzoom.com/business-formations/summary-compare-business-fo...
http://www.legalzoom.com/business-formations/compare-documents.html
Please feel free to contact Steve at (888) 381-8758 Ext: 106 for further assistance.
Sincerely,
LegalZoom.com Staff
Submitted by on Nov 30, 2010 - 11:17AM
We would like to set-up a limited liability partnership before the end of the year effective January 1, 2011. We are CPA's. What do we have to do? How much does it cost?
Thank you.
Submitted by on Nov 30, 2010 - 2:17PM
hi,
I have a small transportation company, if I make it llc or corp can it be claimed as such for the whole 2010 year?
thanks
Submitted by on Dec 3, 2010 - 3:04PM
Ahmed, thank you for submitting your inquiry. Keep in mind LegalZoom is not an accounting firm and cannot provide tax advice on your behalf. Please direct this question to a tax professional to determine whether or not you will be able to take advantage of tax benefits for the 2010 fiscal year if you form an entity. If you find you will need to form an entity quickly to ensure its formation by the year’s end, please call our Business Formations department directly at (888) 381-8758.
Submitted by on Nov 30, 2010 - 7:34PM
If a business has a plan of going public one day in the future. Should they set up a corporation or LLC?
Submitted by on Dec 3, 2010 - 3:04PM
Most companies that go public do so as a corporations. While it is not impossible to go public as an LLC, investors find the stock-based ownership structure of corporations more attractive. Many LLCs who decide to go public change entity type prior to actually filing for public ownership. Please call our Business Formations department directly at (888) 381-8758 if you have more questions in relation to this.
Submitted by on Dec 2, 2010 - 10:03PM
I registered for an LLC in NM in 2006 through an on-line law company. I have no done anything with the LLC, and this year I changed the address and opeform rating agent to my name. I also applied for an EIN through SS-4. No one told me whether an EIN was required, but when I talked to persons who own an LLC said it was required.so I never applied. Thus, a week ago I submitted an application (SS-4)for an EIN. I am assuming I will be given one, but have no idea when it will be approved. I have been involved with real estate and I would like to protect my assets. I am registered with the State corporate agency, but do not know whether I can do any busines as an LLC until such time I get my EIN.I guess I can call them. I am essentially involved with real estate and have operated as a sole propiietorship. However, I need to pursue the tax breaks, but do not know how far I can go back (2006, this year or have to wait until 2011.
Submitted by on Dec 3, 2010 - 3:56PM
Thank you for contacting LegalZoom about your entity needs. You will need to contact the IRS directly at (800) 829-4933 to inquire about the status of your SS-4 application to obtain an EIN. Keep in mind, you may need to have the EIN for the LLC to open bank accounts, transfer title of property, etc. Also, please contact a tax professional to determine tax breaks for your business as well as how far you can date your taxes back to.
Submitted by on Dec 7, 2010 - 1:39PM
I need to change from an LLC to S corporation. Is this like starting from scratch?
Submitted by on Jan 13, 2011 - 10:06PM
I filed for a sole proprietorship a few months ago and now I see that I may have make a mistake. I want to change my business to an LLC. How do I go about doing this? Where do i start? How long will the process take? My business is not up and running yet, I don't plan for it to be until September 2011. Please help.
Submitted by on Jan 18, 2011 - 12:29PM
LegalZoom can assist you to convert your existing sole-proprietorship into a Limited Liability Company (LLC). Our process is completed online, and we can take care of the filing process on your behalf. The process can depend on the package you choose as well as the state you form out of. Please contact one of our Business Services specialists at (888) 381-8758 for more detail on starting your LLC.
Submitted by on Mar 4, 2011 - 8:48AM
Do I need to get a new EIN# for our LLC eventhough I have a EIN# with our DBA.
Submitted by on Mar 7, 2011 - 10:58AM
Dear LegalZoom Customer,
Thank you for contacting LegalZoom for your online business needs. If you are converting your already existing DBA into an LLC (Limited Liability Company), you may need to get a new Federal Tax Identification Number, or EIN. The IRS may allow you to keep your existing EIN for your business, but since you are creating a new entity, this is case to case. You may need to speak with the IRS directly to determine whether or not you can use the same EIN as an LLC.
LegalZoom can assist you to establish a new LLC as well as obtain a new Federal Tax Identification Number on your behalf. I have provided our LLC link to get you started:
http://www.legalzoom.com/limited-liability-company/limited-liability-com...
If you have any further questions, please feel free to contact our Business Formations Department directly at (888) 381-8758.
Sincerely,
The LegalZoom Team
Submitted by on Apr 20, 2011 - 2:18PM
Hi, We have a partnered LLC and are considering buying stock and full ownership of an S corporation. As such we are under the understanding that we would need to be an S corporation to own/purchase the company.
What are the requirements to convert from an LLC to an S corporation in the state of Virginia.
Thanks
Submitted by on May 10, 2011 - 5:48PM
I have a small marble & granite company & we recently incorporated. Now, i think we were advised wrong & i think a LLC would be better. Now that we're a corporation is it possible to terminate the corporation and go LLC? If so, how do i do that?
Thank You, Karen
Submitted by on Oct 14, 2011 - 9:38AM
I recently started and filed a LLC tax indentiy for a Real Estate investment company, primarily focusing on fliping properties and owning rentals, it didn't deem to be as lucrative as i thought. Now, I'm turing to construction where I will have salaried workers and more profit. I don't think the original LLC is the best fit. If possible, can I my compny name and just change the LLC to an S- corporation? If so, how can that be done? Thanks.
Submitted by on Oct 27, 2011 - 10:01AM
I am a agent for an LLC that we file as a partnership. We have several members (shareholders). What forms do I need to buy out some of the current members (shareholders)?
Submitted by on Nov 9, 2011 - 10:58AM
My husband formed a LLC for small business few years ago through legalzoom. Now he wants to transfer the ownership to my name. Can you please explain the legal procedure for that?
Thanks.
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