Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (20) | Ignore Thread Prev | Next
Author: criser Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121106  
Subject: Re: Business Structure - Tax Efficiency Date: 9/20/2000 6:51 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I don't disagree with this but I don't think this strategy could be used in the scenario presented - a consulting business formed by two active consultants. If memory serves, individuals engaged in consulting activities are considered active participants, even if they don't meet the 500 hour requirement.

You're right - I'd strayed a bit from the original question in my LLC proselytizing! But I am always looking for an opportunity to spread the word that S corps aren't the only way to minimize SE tax.

Also, I'm not sure what additional liability protection they would get from an LLC/S corp over and above a regular S corp. In my state (Pa.), there's a $50 per member per year fee imposed on LLCs.

Charging order protection can be very valuable. Whereas a corporate shareholder's stock is exposed to his creditors, an LLC member's LLC membership interest cannot be directly reached by a creditor. The creditor can obtain a charging order giving the creditor the debtor-member's economic rights to distributions, but NOT the member's management and/or voting rights. If the LLC doesn't make distributions, the creditor could have a long wait and could be taxable on the LLC profits allocable to the interest (despite receving no actual distributions). This can provide a strong incentive to settle that's not there where the debtor's business interest is corporate stock.


Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (20) | Ignore Thread Prev | Next

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Post of the Day:
TMFDeej's CAPS Blog

Activist Investors Unlocking Value at LSB Industries?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement