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Well, here's the problem I found: LLCs are not treated consistently by all of the states, and I will be doing business in more than one state (actually having a

Well, here's the problem I found: LLCs are not treated consistently by all of the states, and I will be doing business in more than one state (actually having a physical presence in multiple states). Therefore, that is the reason for a DE incorporation and my thoughts on using an S Corp (which I can at some point check the box and change back to a C Corp). The "credibility" issue I spoke of also applies not just to investors, but bankers have also been more hesitant to loan to an LLC. I saw this with a previous LLC entity I was a partner in. Also, benefits paid to employees through an LLC are fully taxable income to them, whereas with a Corp (either S or C) they are tax deductible (for employees owning less than 2% of the company). Furthermore, the stock ownership ("units") situation with LLCs is awkward at best, like you said, so forget about incentive stock options and the like. I understand the simplicity and have used the LLC structure before for other reasons, but never for a multi-state entity. Great input, thank you.

redtexture 13y ago
Some questions to pursue with your advisers: What are the tax issues upon dissolution/merger/conversion of entities from one to the other, for the owners and the entity itself? Is there an impediment to rapidly converting a Subchapter-S corp into to C-corp - are there be any delays, fiscal year issues or alignments, or other IRS filing or election issues and impediments, again for the entity and for owners? For foreign LLCs in terms of the "corporate veil" and limited liability, etc., set up in state Z, how does the foreign LLC get treated in other states of interest, states A, B, C, and D compared to the foreign corporation set up in state Z, operating in states A, B, C and D? Do those several states follow the IRS-election for taxation of local-state activity? What advantages / disadvantages for the LLC to elect to file with the IRS the "filing as corporation" status, instead of the default sole proprietorship/partnership status, or --yes you can elect this too-- "Subchapter-S"?
thejteam 13y ago
I am not a tax attorney, but I've never heard of employee benefits being treated any differently in an LLC versus an S or C corp. Edit: After looking it up, benefits paid to employees receive the same tax benefits as other structures, BUT shareholders/partners are taxed individually on the benefits they actually receive. Non-ownership employees won't have the problem. But again, I am not a tax attorney or accountant.

redtexture 13y ago

Some questions to pursue with your advisers: What are the tax issues upon dissolution/merger/conversion of entities from one to the other, for the owners and the entity itself? Is there an impediment to rapidly converting a Subchapter-S corp into to C-corp - are there be any delays, fiscal year issues or alignments, or other IRS filing or election issues and impediments, again for the entity and for owners? For foreign LLCs in terms of the "corporate veil" and limited liability, etc., set up in state Z, how does the foreign LLC get treated in other states of interest, states A, B, C, and D compared to the foreign corporation set up in state Z, operating in states A, B, C and D? Do those several states follow the IRS-election for taxation of local-state activity? What advantages / disadvantages for the LLC to elect to file with the IRS the "filing as corporation" status, instead of the default sole proprietorship/partnership status, or --yes you can elect this too-- "Subchapter-S"?

thejteam 13y ago

I am not a tax attorney, but I've never heard of employee benefits being treated any differently in an LLC versus an S or C corp. Edit: After looking it up, benefits paid to employees receive the same tax benefits as other structures, BUT shareholders/partners are taxed individually on the benefits they actually receive. Non-ownership employees won't have the problem. But again, I am not a tax attorney or accountant.