LLC? Inc?

[DarktidesNET]

How exactly does a normal business license and an LLC/Incorporation differ?

I've read various things on sites/locally, but I see a lot of you guys that are registered as something are one of the two. Care to share insight?

[Chicken]

Well, you register your business as an LLC for tax purposes, partnership purposes, etc. A business license just means you are able to conduct business, it (simply put), has notign to do with business formation in terms of structure, taxes, etc.

What is it that you are looking to do and how is your business structured currently? Have you registered as Sole Proprietorship?

[DarktidesNET]

We're getting a normal business license from City Hall (who actually told me I don't need one for webhosting ... strange)

Right now, I am the only one who has financial gain from this. My neighbor (and friend of 10+ years) is going to invest into it too as a partnership (but not 50/50, more like 80-90 / 10-20). My brother in law also expressed interest in the idea, but only if we support Windows.

All the licnesing is going to be finalized Friday (unless it takes longer than they said...).

I would like options open to be able to take up investors, whether realitives or local. With my brother in laws help (we will be getting Windows machines and most likely localling colocating with a major ISP here) it will most likely end up as a 3 person partnership. I still want to be the main guy (CEO/President, whatever...) as I have more experience/skill in this area than them.

My cousion, who is an accountant, is going to mess with that. I also have another cousin, who is a paralegal, and is going to assist in drawing up better terms of services, AUP, and SLA's.

From that information, I'm not sure what is the best to go in to. From my talks with City Hall a business licenses doesn't seem to be everything I need, thus I'm asking here....

I guess to draw it out to the best of my abilities, the chain of command I would like is the following:

.----- Me (top)
| -------> Brother in Law & Friend (who invest money and get a % back,)
|-- employees

I will not be hiring employees for a long time, as currently we have enough people to take care of everything fine. With the addition of the two investors (friends/family) who are going to be getting into this (I'll be teaching them and what not....) they will also be additional tech/support people that will not cost any additional money, only time to train them on my helpdesk and get them familiar with the ends and outs of cPanel etc.

They have some Linux knowledge, but will not be admining.

In 2004 (or later this year, depending on how successful we take off) I will be looking into a bank loan of about $10,000. I have excellent credit for my age (20, will be 21 soon) as I've had a small bank loan in the past, along with 2 credit cards (Platniums) for over 3 years that have credit credit histories, not to mention other things in my name (pager, phone, cable, etc...)

Not trying to get too much into my business model or plans, but with the $10,000 loan I planned to expand into a local office in town (very small, but going for $1500 a month) with help from my brother in law we'll be forming a local company that does networking and such (he's certified, has a masters degree in that stuff.... but hates his job even though he makes great money)

So I guess for now I would like to remain the top dog, but have the ability to have equals down the road. I'm not sure which route to go, and City Hall offered no help to me really. They told me to simply get the license (which they said I don't need to sell hosting....) but nothing about Incorporation and an LLC.

What would be the best route for me to go?

[James]

bryan,
hrmm well for now you can do a LLC as a limated partnership. with your brother inlaw or who ever and the partner. then later on as things grow you can incorp the comp and go from there
just one thing to remember tho as a LLC you dont pay the corp taxes as with a full blown INC.
so you will want ot stay as a LLC for as long as possable becuase you get taxed twice as a INC.
some info from my accountant i thought i would pass on
laters
James

[VoxKeysGtr]

From what little I know, so far, about these business structures is that an LLC offers much more flexibility for your business. I had originally wanted to inc, however, from what I have been reading in my research on this subject is that an Inc might not be the best answer for my needs. I would suggest getting professional help from an attorney or accountant to help you through this. It's mighty confusing at times, and there are serious ramifications, legally speaking, that need to be taken into account, hence the recommendation for professional assistance. Good luck (to us all!)...:cool:

[DarktidesNET]

Alright, I'll get the normal licnese as planned and then talk to my cousin more about being an LLC and see about that.

Thanks.

[Chicken]

Your business license (which isn't really needed, as city hall told you), isn't something that organizes how your business is run, who does what, who gets paid what out of the profits, who makes the decisions, etc. As of now, you're most likely operating as a Sole Proprietor which means one person is in charge and liable for the whole monte. Good, but that doesn't seem to fit with how you want the business set up.

[DarktidesNET]

Well, I'm going to be calling my cousin to setup a time for her to come over and help me sort through all this .... thanks everyone I hope I pick the right one.

For right now, an LLC is what I think I will aim for, but I will listen to someone who knows more about how it all works if they tell me otherwise.

Off topic here... but I am glad I found this forum. I just don't feel comfortable talking about things like this on WHT, as everyone's quick to judge/bash you for asking questions and for help.... thumbs up to Chicken for a nice community that everyone is respected equally in.

[Chicken]

From researching it pretty extensively (though I am not an accountant nor lawyer), an LLC seems to be a extremely good option (LLC's are relatively young, but offer attractive benefits over C or S Corporations). Ask though, I wish I had LLC'ed. :(

OT: Your welcome and glad you can be a part of the early years. Trick is to maintain that. :D :chicken:

[ljprevo]

Either LLC or Inc, but I would definitly stay away from a partnership agreement.

I just filed to incorporate my business, elected S corp. I am going through mycorporation.com

The cost was $417, but I feel it is well worth it since I am bringing on a partner as well.

[DarktidesNET]

What benifits is Inc? I was going for them, but I was told you're double taxed on everything....

[ljprevo]

Not sure, but I was told to elect the S Corp status so you are not doble taxed. Meeting with my accountant withing the next fews weeks, I may have more info then.

[allan]

Originally posted by ljprevo:

Not sure, but I was told to elect the S Corp status so you are not doble taxed. Meeting with my accountant withing the next fews weeks, I may have more info then.

Correct, according to our accountant, with an S-Corp you are not doulbe-taxed. An LLC is a really nice option in terms of liability protection, it is also useful if you are going to have investors.

[browsehosts]

it's a good idea to start out as an LLC and grow from there. you don't want to be double taxed and loaded with paper work before you are actually making enough to be able to hire an accountant and lawyer to take care of it all.

[DizixCom]

An LLC is like an S Corp without all the hassle. If I had to do it over again I would definitely opt for LLC over Incorporating, but what is done is done.

[ljprevo]

Originally posted by DizixCom:

An LLC is like an S Corp without all the hassle. If I had to do it over again I would definitely opt for LLC over Incorporating, but what is done is done.

Oops, I already went with the S Corp option.

What are the benfits of the LLC?

[DizixCom]

They are very similar as far as benefits. You have the protection of limited liability with both, pass through taxes, etc. The only noticeable difference that I can identify between the two is that with an S Corp you can sell individual shares of stock in your company. I am unsure as to how ownership is allocated among an LLC. An LLC really seems to be a newer much simpler form of an S Corp, removing a lot of the unnecessary clutter that comes with incorporating.

[ljprevo]

Originally posted by DizixCom:

<snip> with an S Corp you can sell individual shares of stock in your company. <snip>

Which is what I am doing. :cool:

[markcw]

If you want foriegn investors, then LLC is actually better than S corp! I remember 6 years ago LLC wasn't avaliable in Illinois, but my accountant said it looked like it would be a great way to go.



http://www.llc.com/corp_type.cfm#llc

Limited Liability Company (LLC)

The LLC is not a corporation, but it offers many of the same advantages. Many small business owners and entrepreneurs prefer LLC’s because they combine the limited liability protection of a corporation with the "pass through"" taxation of a sole proprietorship or partnership.

LLC’s have additional advantages over corporations:
LLC’s allow greater flexibility in management and business organization.
LLC’s do not have the ownership restrictions of S Corporations, making them ideal business structures for foreign investors.
LLC’s accomplish these aims without the IRS' restrictions of an S Corporation.
LLC’s are now available in all 50 states and Washington, D.C. If you have other questions regarding LLC’s, be sure to speak with a qualified legal and/or financial advisor.

[DizixCom]

Mark,

How are LLC's "sliced" up amongst investors? I was told that it was much more complicated to add investors to an LLC whereas with a Corporation you simply have to register the shares or sell existing shares -- this is what I thought was the major difference between LLC and S Corp.

[DarktidesNET]

Good news, I got my licsense just now (got home right now and came to update). Was a lot easier to get than I thought, however explaining what exactly "webhosting and services" was to the zoneing enginer took more time than the whole license *laugh*

Now I'm setting up a meeting with my cousin for next weekend or the following to get the LLC stuff figured out.

Mark: Thanks for the link. I will be checking this out.

[DizixCom]

Here's a good link that defines LLC's and their advantages pretty well:

http://www.allbusiness.com/articles/content/18592.asp

[Chicken]

Originally posted by DizixCom:

An LLC is like an S Corp without all the hassle. If I had to do it over again I would definitely opt for LLC over Incorporating, but what is done is done.
What he said, exactly... but that is per situation.

[Crash64]

For those of you that say you regretted Incorping instead of LLC'ing, can you tell me why?