Hello, I have a business partner and we want to start a video production company together. I live in LA, CA. We will have outside investors. Is this a simple LLC (but with two owners), or should this be an S Corp. thx, Alicia
Normally an corporation selecting Subchapter S treatment is used.
Do not take money or make representations to investors, or issue any securites, without speaking to an attorney.
You probably will want a "buy-sell" agreement for shareholders and possibly a management agreement.
Bottom line, you need a CPA and a lawyer to help you get answers to questions you didn't know you need to be asking.
The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.
Despite the hype for LLCs, they are usually better for passive investments and businesses, primarily because subject to self-employment tax. Here's a post I wrote about selecting between S corp or LLC. https://www.robertgschrader.com/better-self-employed-s-corp-llc/
If you are anticipating going public at some point, a C corp may work better, especially given the new tax law and lower corporate rate. (Also have a post on that too).
You should consult in private with an attorney that can advise on the best structure for your specific situation and long term plans. You should also consult with your CPA regarding the tax implications of the entity chosen.
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I agree with counsel above.
Note also that although best solutions may generally take one form, it is not a one-size-fits all. You may need to consider community property issues, what your plans are as to the number of investors in the future.
What counsel said about buy-sell agreements is very important.
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