I am starting a construction company & I am the only employee at present. I want to pay myself a salary and put remaining earnings back into the business. Should I form an Inc. or an LLC?
Construction / Development Lawyer
I agree with the previously provided advice. The tax treatments for an LLC vs. a corporation are very different. The key benefit to an LLC is that losses and gains are passed through to your individual tax returns and are not subject to double taxation as are corporations. A corporation's earnings are taxed and then the dividends to the shareholders are taxed on the shareholder's personal return. A corporation is generally more beneficial if you anticipate eventually taking the business public. Generally speaking LLC's provide you the same protection as a corporation but have the benefit of less onerous record keeping requirements (i.e. no year end minutes and no notices to shareholders are required). Find a competent tax attorney or CPA and discuss your personal financial situation to determine which entity best serves your needs.
You should sit down with a tax lawyer or CPA to understand the different tax issues between an LLC and an S-corporation. The decision is very fact dependent on this advice upfront can save you a lot of trouble and money in the future.
The above statements are provided as general information and not intended as legal advice. Each matter has its own set of unique circumstances that cannot be adequately addressed without consultation. You are strongly advised to hire an attorney licensed to practice law in your state to represent you.
Generally there may be very little difference between a "S-Corporation" and a LLC tax wise so.. There may be differences in reporting and how your "salary" functions. Further many "old time" accountants are much more likely to have knowledge of how to handle issues with a S corp.
Generally it depends on how big you expect to grow and how many employees you expect to have and how much $$ in assets (tools, equipment etc. you will purchase) in the future.
However, the best assets a small construction can have are a good attorney and a good accountant.. so get both!
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