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Which Startup Is Less Taxing?
Richard Booth: Because of the text benefits LLCs are the first form of business that most new businesses should consider.
Eliot Wagonheim: Money flowing into the company is treated differently depending upon what kind of company it is.
Richard Booth: With LLC you can take advantage of the losses in the early years of the business is expected to have losses. That can be a good thing, because the losses can be taken personally on the individuals tax returns and they can be used in effect to shoulder other income.
Edward Jacobson: In a C corporation those losses will be tracked at the corporate level and you will get no personal benefit from those loses.
Richard Booth: Now, the problem with the corporation is that you have to pay an annual tax which can get a bit expensive $200 or $300 even for a corporation that doesn't even make any money. The one thing to consider is that you can never go back from being a corporation to being an LLC. It's very easy to turn an LLC into a corporation, if you need to so for purposes of raising money, but from the tax point of view it's a one way street. You cannot go from being a corporation to being an LLC without adverse tax consequences that you really would not have to suffer, if you simply started out with the LLC form.
Eliot Wagonheim: And that's why it's important not only to seek advice of business attorney as to what type of company to form, but also a seek the advice of an accountant as to what the different tax advantages and disadvantages are.
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