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Old 04-06-2009, 04:43 PM
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Cleaning Business

I'm opening up my own cleaning business, I do not have any workers at this time. I will probably do the cleaning for a few months, then bring on workers. Should I become LLC or Inc.

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Old 06-05-2009, 12:05 AM
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Generally speaking, in todays business climate most new start up businesses opt for the LLC option for several reasons.

For your specific business, there are some tax benefits in selecting the LLC, because in some states there is either a minimal or no Franchise Tax for LLC's. Whereas in most States, a " Minimum Franchise Tax" is applicable to all Corporations, for example, in New Jersey State the minimum Franchise Tax applicable to Corporations is $520 for tax year 2009 (It can go as high as $2,000 depending on your revenue).

But, then there are no tax issues that benefit the LLC option over the Inc. This is mainly a legal issue that I urge you to consult with your tax attorney who would have expertise in your State.

There are a few disadvantages of being incorporated as an LLC in that all your self-employment income is subject to Self-Employment taxes, whereas in the S corporation, an owner/officer of the corporation needs to take what is termed as a reasonable salary and balance of the profit flows through the K-1 exempt from S/E tax. The tax benefit derived from portion that flows through the K-1 needs to be compared to all the tax and non-tax benefits of incorporating as an LLC. Based on these, perhaps you would be able to make a better decision in determining what form of entity is the best chioce for your business.

Clearly, I would urge you to discuss these pros and cons with your CPA prior to making a determination as to what option would be best for your unique situation.

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