My cabinet shop will be located in Virginia. I've noticed that there are a lot of LLC's popping up in my area and that many local lawyers are leaning towards LLC's.
Are there any advantages to an LLC vs. S-Corp? LLC's haven't been tested in VA courts, to my knowledge. Which is the lowest cost to set up and maintain?
First, I'm no lawyer. The one that is recognized by both state and federal, limits liability best and avoids an IRS schedule 'C'. Some states don't really recognize a Sub-S. Personally, I like a full corporation but the LLC is touted as being as good. You, your accountant and your attorney can make the right choice.
LLC - no 6% VA Corp. income tax
LLC - no 2.5% VA unemployment tax
LLC - same provisions for liability protection
LLC and S-Corp both have pass-through income tax filing.
My company will be fairly small and S-Corps don't have the perks that C-Corps do, anyway. It looks like an LLC is the same as an S-Corp as far as tax filings/benefits, but with less paperwork, annual fees and taxes, and more flexibility regarding use of assets and how/whom can be a partner.
Is anyone out there right now using an LLC?
I obtained the above information from Virginia documents and guides. I haven't talked to a lawyer yet because the minimum fee is nearly cost prohibitive for consultation. CPA's not much cheaper.
Comment from contributor A:
An LLC will provide asset protection for the owner as well as the S and C corporations. The difference is that corporate formalities are required to be observed S and C corps (it is not a bad idea to also do it with an LLC). If you are a small business you will more than likely be sued personally along with your corporation. However, if you look and act like a corporation, the Court will more than likely not let the corporate veil be pierced and let the Complaintant know that he is trying to sue the wrong entity.
An LLC is a pass-through entity so all income and deductions will be passed through to the individual taxpayer. You will pay tax at your individual rate.
And to change from a C to an S corp, you make an election by filing the appropriate forms.
LLC's are an accepted form of entity recognized in almost every state. If you feel uncomfortable that the LLC is not tested in VA courts yet, register as a Delaware LLC and register as a foreign LLC in VA. The only remedy to an LLC creditor of a Delaware is a Charging Order. A very handy tool.