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LLC or Corporation?

Question:

I was just reaching out to get some advice on transitioning from an LLC to a corporation. I was promoted to manager just recently and would like to begin instilling more corporate practices. I have and read through you marketing & management book and it has help quite a bit. So was just looking for any other reads you may recommend. Thanks again for getting back to me. 

Glad your ride off into the sunset has begun!!!

Answer:

Thanks for your confidence in our expertise. 

Actually, there are several types of corporations. 

▪          a regular C-corporation is one in which the year-end profits are taxed before distribution.  The tax rate varies depending on the amount of profit made. 

▪          a C-corporation with a sub-S election is one in which the corporation's profits accrue to owners and are taxed at their individual tax rates.  It helps avoid double taxation: once on the undistributed corporate profits at year end, and again, when those profits eventually are distributed to company owners.  Ours is a C-corporation with a sub-S election.  Profits accrue to me and are taxed at my individual tax rate, which in some years, can be more than the corporate tax rate, if they remain in the company as undistributed profits. 

▪          an LLP is a limited liability partnership, of which I have one for real estate holding, in which year-end profits accrue to immediately to the partners, and are taxed at each individual partner's tax rate, based on his or her total income in a given year. 

▪          an LLC, of which I have at least one.  It's my understanding that profits in an LLC are distributed to shareholders and are taxed at their individual tax rate. 

Now, having said all that, let me qualify my remarks by saying that none of this is simple with today’s tax code.  I don’t offer accounting or legal advice.  You’d be prudent to consult a qualified accountant or tax lawyer for advice on the corporate form that’s best for your company. 

L. Jeff Bishop, SCRT Technical Advisor

Clean Care Seminars, Inc.
406 Forsythia Lane
Dothan, AL 36305
334.446.1531 office
334.7903145 mobile
www.CleanCareSeminars.net

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