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Old 04-16-2007, 07:25 PM   #1
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Default INC vs LLC vs General Partnership

I am in the planning phases of (re) opening a design/media company with an associate. I need to determine whick business classification we should form. This place seems to be full of smart people, so I was hoping someone on here has some type of advice to offer. It is going to only be myself and a partner at first, but there may be expansion down the road. We plan to use my current book of web clients as well as take on new porjects for design and maintenence and begin a targeted line of user communities to create revenue.

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Old 04-16-2007, 07:35 PM   #2
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My partner and I chose an LLC. Effectively, it is a partnership with a liability shield. You can't sell stock, but should you get to the point where you need/want to, conversion to Inc. isn't difficult.

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Old 04-16-2007, 07:48 PM   #3
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Originally Posted by david_42
My partner and I chose an LLC. Effectively, it is a partnership with a liability shield. You can't sell stock, but should you get to the point where you need/want to, conversion to Inc. isn't difficult.
The LLC also provides the double taxation protection that Inc's have to pay, correct?
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Old 04-16-2007, 08:02 PM   #4
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A LLC is flow-through for taxes, like a partnership.

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Old 04-16-2007, 08:38 PM   #5
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I agree with LLC. I've formed an LLP in the past but the problem is that it's only limited liability for limited partners, not general partners and there has to be at least one general. As long as it's not you you're safe, but I'm betting it would be you.

Also keep in mind that partnerships are supposed to have a limited timespan that is pretty well defined while it is assumed an LLC is an ongoing venture. LLPs are harder to expand to include more partners. I believe you have to tear it down and construct a new partnership agreement each time.

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Old 04-16-2007, 09:35 PM   #6
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How does income taxes work with an LLC?

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Old 04-17-2007, 12:36 AM   #7
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As stated, the LLC is a pass through entity, so the business entity is not legally separate from the person that owns it. Therefore, at income tax time, the owner reports all business income and losses on his individual income tax return. The business itself is not taxed.

I have my business trading stock options set up as a limited partnership, with all of my trading accounts in the LLC (limited partner) managed by my Nevada C corp (general partner). I can use a Nevada C corp because my business does not provide a 'good or a service' in the state in which I reside. Fortunately, the blood sucking attorney and accountant handle all of the red tape for me.

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