

Creating a Startup - Choosing a Company Type - maccman
http://leadthinking.com/63-creating-a-startup-choosing-a-company-type

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dennykmiu
For a bootstrapping entrepreneur, LLC is clearly the way to go. If and when
you do receive VC funding (which is difficult if not impossible to do these
day), you can do a tax-free transfer from a LLC to a C-Corp. In the meantime,
it allows you maximum flexibility. The only big concern with LLC is that any
income is taxed as personal income (not investment income) and therefore you
would need to pay payroll tax (about 15%, before Federal and State tax). Also,
the annual franchise fee is calculated based on "gross" income and not "net".

This is an important subject. For those of us who are interested, I have
written more on that in the following.

<http://www.startupforless.org>

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tptacek
With an S-Corp, you can pay yourself a "reasonable salary" subject to payroll
tax, and then pay distributions to yourself over and above that. I've been
told this is an audit flag, and it doesn't seem worth it for the minor gain.

There are also complexities to issuing equity from an LLC.

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dennykmiu
I agree. I have written about my own experience which is for an LLC to elect
to file tax as a S-Corp (filing a Form 2553). It is the best of both Worlds.

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dennykmiu
<http://www.lovemytool.com/blog/2008/01/bootstrapping.html>

2nd part of the long article. Thanks, @bravura.

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tptacek
Isn't this basically a rehash of a Feld article, down to the "check box on the
IRS form" and the "frowned upon" UBTI tax?

Does it actually matter what company structure you have when you go look for
funding? I don't think it does. Everyone I've ever talked to on this subject
says "whatever you do, they're just going to re-do it anyways."

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bravura
Yes, it is a rehash of the Feld article.

The author clearly doesn't understand the nuances of the issues, and it just
repeating someone else. This is evidenced by: "Incorporating a LLC". You can't
_incorporate_ an LLC, you _form_ an LLC. An LLC isn't a corporation.

