Law Vibe

I’ve been interested for a while in the foundation of how a business gets started, in a legal sense. I mean, you look at some of these business books and you start reading about INC, LLC, C-Corp, S-Corp and you just start thinking, “What the heck do I need here to start a business!”

Well I found a great FAQ about the different types of business entities you can form. For example I liked this part about the difference between an LLC (Limited Liability Company) and an INC (Incorporated a.k.a. Corporation):

“LLC” and “Corporation” have many of the same characteristics. The most important characteristic they share is that they both offer limited liability protection to its owners. Typically, shareholders are not liable for the debts and obligations of the corporation; thus, creditors will not come knocking at the door of a shareholder to pay debts of the corporation. In a partnership or sole proprietorship the owner’s personal assets may be used to pay debts of the business. With an LLC, the members are not personally liable for the debts and obligations of the corporation.

There are many important differences between the corporation and LLC. The entities are taxed differently. An LLC is a pass-through tax entity. This means that the income to the entity is not taxed at the entity level; however, the entity does complete a tax return. The income or loss as shown on this return is “passed through” the business entity to the individual shareholders or interest holders, and is reported on their individual tax returns.

With a standard corporation, the corporation is a separately taxable entity. Corporations are treated as a separate legal taxable entity for income tax purposes. Therefore, corporations pay tax on their earnings. If corporate earnings are distributed to shareholders in the form of dividends, the corporation does not receive the reasonable business expense deduction, and dividend income is taxed as regular income to the shareholders. Thus, to the extent that earnings are distributed to shareholders as dividends, there is a double tax on earnings at the corporate and shareholder level.

The website is called incparadise.com and they focus on doing online filings to start corporations in all 50 states, so whether it’s a Nevada incorporation you’re looking for or to start an LLC in Hawaii, they can do it. According to the website, the price for their services will run you $89 plus state fees for doing all of the necessary paperwork to start a corporation.

They also have a blog where I found an interesting question and answer about whether or not to have multiple companies under one LLC. According to the blog author it’s perfectly fine and acceptable to have multiple companies under one LLC, as you can file a DBA (Doing Business As) if you’d like different names. The author also adds that this helps simplify your business as you’ll have less bookkeeping and record keeping to deal with. Simplifying your life and your business is definitely a good thing!