Should I form my online retail company in CA as an LLC with S Corp tax status by filling IRS form 8832 or should I just form an S Corporation?
If I am an LLC with S Corp tax status, can I still pay myself a small "reasonable" salary and then pay myself the rest through share distributions like an S Corp can?
What can an S corp provide me that an LLC with S corp tax filling status cant?
On a side note, should I own my trademarks personally or should my company own them?
3 Answers from Attorneys
For retail, and absent other factors, I'd prefer an "S" corporation to an LLC because LLCs are taxed in California on sales as well as income.. Get a good book on forming small businesses in California and read all the decision-affecting considerations, or retain a business attorney.
It depends. There are many factors influencing the decision and the nature of your operations and anticipated business will make the decision. You really need to meet with an effective corporate and tax attorney, or a CPA, to assist in the decision. The factors will include revenues, employees and payroll, return requirements, tax impositions, long term plans as to sale, your personal estate planning decisions and multiple other considerations. I write a book which is largely devoted to the subject. My book focuses on S Corporations, while I use more LLC's than S Corporations in my practice.
You will not find a definitive answer to your question, and there is no universal response that would prefer one approach to another in all situations. Worse, once you elect treatment as an S Corp. later developments may well make this a bad situation, and you will wish your were an LLC. Conversion from an S Corp to an LLC is a taxable event (a deemed sale) . Conversion from an LLC to an S Corp is not usually a taxable event.
Congress is also in the process of reexamining all passthrough taxation at this moment, and the rules may change drastically for LLC's and S Corps (as well as partnerships). Seek professional advice by engaging counsel. This gratuitous response does not create an attorney client relationship.
The advice provided herein is generic, may not apply to your circumstances and is not to be relied upon in your actions. An attorney client relationship is created only upon execution of an engagement letter hiring me or my firm.
Mr. Whipple is correct with regards to your S-corp question.
As to your trademark question, I would recommend that your company own the mark since the company will be the one conducting business not you personally. Furthermore, it will make it more attractive to potential business buyers in the future, if you should decide to sell the business.
Goodluck on the new business.
Related Questions & Answers
May I copy another company's terms of service agreement and replace my company's... Asked 6/18/13, 11:40 am in United States California Business Law
What if my business name is not available in every state where I would like to... Asked 6/17/13, 3:36 pm in United States California Business Law
"Our non profit astronomy club has been offered land so we can have a place to... Asked 6/17/13, 1:51 pm in United States California Business Law