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Does anybody here have the knowledge or experience in what the difference's are between an LLC, an S-corporation and a C-corporation? I am looking to incorporate myself and after talking to a couple of accountants and attorney's, I am as confused now (maybe more so) than when I started looking into it.

From what I got from these discussions, the main drawback to an LLC is I would have to pay to place an announcement in the local newspapers in the legal section. However, if this is the only thing separating the LLC from an S-corp., I don't see it as being a major obstacle, especially if it meets my criteria.

I am looking to get protection from the great American past-time of suing for profit. One of the things I will be doing is computer repair and setup. I will be doing this mostly for individuals and small businesses. I will also be setting up a web site (at least one) for selling products and affiliate type sales.

If anyone feels they can help, I would greatly appreciate it.

I thank you in advance,

BuzzardLip
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I am looking to get protection from the great American past-time of suing for profit. One of the things I will be doing is computer repair and setup. I will be doing this mostly for individuals and small businesses. I will also be setting up a web site (at least one) for selling products and affiliate type sales.



Selecting a business structure is important and others here can advise you on the advantages/disadvantages of the different options.

Depending on what type of "protection" you seek, every business structure will come short.

Even if someone files a lawsuit against you that has a 5% chance of success, you still have to incur costs to prepare to defend yourself, devote time to the matter, etc.

Most small businesses purchase general liability insurance along with some combination of professional liability or completed operations insurance. Typically, the insurance company will hire an attorney to defend you and pay any judgements/settlements, up to the policy limits.

Along with selecting a business structure, sit down with a knowledgeable Independent Insurance Agent to discuss your needs.


ShelbyBoy

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However, if this is the only thing separating the LLC from an S-corp., I don't see it as being a major obstacle, especially if it meets my criteria.

LLCs are probably the most convenient business form when you're a sole proprietor looking to get some amount of protection. They're significantly less complicated than S or C corporations. LLCs have the pass-through taxation advantage of S-Corps. C-Corps are far too complicated for what you're doing, and even an S-Corp doesn't make much sense unless you have multiple owners and want to issue shares.

A lot of this highly depends on your state, eventual ownership goals, etc. Also keep in mind that the limitation of liability doesn't take effect automatically, you MUST go through the motions of separating the corporation from the individual, which means separate bank accounts, holding board meetings, having by laws in your articles of incorporation, meeting minutes, etc.

I would highly recommend you purchase a book on the subject from Nolo Press or someone similar (www.nolo.com) or go to your bookstore and browse for a few titles in the business section. It's really not that complicated once you read over the sections that detail the differences and choosing the right form.

-Hook
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ShelbyBoy,

Thanks for the reply. I completely forgot about the insurance aspect of setting up and running a business. Thanks for the reminder.

BuzzardLip

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Hook,

I just got back from the Nolo site - it was excellent! There were plenty of resources available for the decision making process to be done at my pace and on my schedule. This is a key factor when you are looking to start a business while holding down a full-time job. Plus, it will be a heck of a lot cheaper than using a lawyer.

Thanks for the assistance,

BuzzardLip.
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Buzzard,
Nolo is a good reference site, BUT should NEVER replace competent legal advice.

If you are setting up a business structure to avoid liability, the Corps may be your better choice because in some states a single member LLC affords no greater protection against liability than the sole proprietor. You really need to invest your time in learning the differences for your particular state, and consult with an attorney.

Finally, although the single member LLC or S-Corp has the pass through for taxation, don't overlook the wonderful state franchise taxes which can also suck you dry; and don't forget to contact your State's comptroller office for the payment of sales tax if your products and/or services are deemed taxable.

good luck,
Jenn
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Jenn,

I didn't mean to imply I was going to do this totally on my own. Rather, I am going to educate myself to what is needed and then go to an attorney and accountant.

My problem was that I had talked to a couple of attorney's and accountants and was left as much or more confused than when I started. Now that I will have some information to digest at my own pace, I can go back and get more specific with my requests.

Through my current job, some of the customers I handle are attorney's and accountants and I already have requested their assistance and they have agreed to help me when I am ready.

From a previous business venture I have learned the hard way what it is like dealing with the legal issues of business ownership, especially with the state of NY. There is no way I want to go this alone and have to deal with them again!!!

Thanks for the advise,

BuzzardLip
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Buzzard,
I did not mean anything awful by my prior post. I see regularly where people find information online somewhere (good and bad) and then make a go of it alone only to discover later the mistakes that were made. I would not want that to happen to any TMF poster, hence my earlier comments.

One more place to seek plain vanilla explainations is the local SCORE office. They can be very helpful with their personal experiences to draw on.

Good luck and let us know what you decide.

Are you going to have employees any time soon? If so, that may sway your decision on type of entity one direction over another because insurance pollicies differ between entity types.

Jenn
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Jenn,

I did not take your prior post negatively at all. Please accept my apology if my reply seemed to indicate so.

As for contacting SCORE, thanks for the reminder. I had used them in a previous business venture and had totally forgot about them. I plan on contacting them tomorrow.

As far as employees go, I don't plan on having any for awhile but will ask about them just in case there are major implications involved regarding which type of corporation to use.

Again, thanks for the advice.

BuzzardLip
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