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Choice of Entity
When setting up a business, it is crucial to set up the right structure in the beginning. This will impact how you run your business, the taxes you will pay, and, ultimately, your financial success. Set up a consultation with one of our knowledgeable attorneys to see which type of organization will benefit you most.
All taxes and deductions flow through the S corporation to the stakeholders. Shareholders must elect to be treated as such by the International Revenue Service. The primary advantage of an S corporation is avoiding the potential of double taxation that is inherent with a C corporation; however, there is a lack of flexibility due to extensive IRS rules and guidelines. An S corporation can be used to reduce payroll taxes and social security contributions. The S-election is made by filing a Form 2553 with the IRS shortly after incorporating.
If shareholders have not elected to be taxed as an S corporation, a C corporation can be used to provide the owners with benefits of using “pre-tax” dollars as well as accumulate assets or wealth at lower corporate tax rates. The primary disadvantage of a C corporation is the double taxation that occurs when after tax profits are again taxed when they are being distributed to shareholders as dividends or salary.
Limited Liability Company
A LLC has the liability protection of a corporation but is taxed as a partnership. Members own the LLC and it may or may not have managers. One of the major advantages of a LLC is reduced formality as compared to a corporation. Another is the flow through tax treatment like an S corporation but without all of the rules and restrictions attached to an S corporation. However, since the LLC is a relatively new construct, one of the disadvantages is the lack of case law to know how the courts will treat a LLC. Additionally, all of the earned income is subject to social security self-employment taxes.
There are five standardly accepted LLC models, but customized models can also be drafted, as per the needs of the business.
- Single Member Management – Designed for a LLC that will have only one member for the foreseeable future. Upon admission of any new members, a new operating agreement must be filed.
- Member Management – Designed like a simple partnership with no centralized membership. Used generally when the owners (members) are all involved in the day-to-day operations and all want to make company decisions.
- Elected Management – The manager is elected from time to time by the members. This form is helpful when the members are companies and not individuals. This structure is also used when some owners will not be involved in the operation of the business but want to elect one or more persons (manager or managers) who will make decisions and run the business.
- All Powerful Management – You should consult your tax advisor before using this type of LLC. Much like a limited partnership, this type of LLC can be used when one member wants to maintain decision making power without allowing other members to elect another manager. This often occurs when a business owner wishes to share profits but not control of the business. Members that are not managers may be subject to or entitled to passive tax treatment.
- “Corporate Style” LLC – Also sometimes called a “Unit” LLC, this type of model is used to mimic the operations of a corporation but be governed by LLC laws. It is most conveniently used when it is anticipated that members will be added over a relatively short period of time. Ownership percentages are determined by the number of shares owned and not capital contribution.
This type of corporation is formed to practice one of the following professions: certified public accountancy, architecture, chiropractic, dentistry, professional engineering, land surveying, law, pharmacy, psychology, medicine and surgery, optometry, osteopathy, podiatry, veterinary medicine, registered nursing, or harbor pilotry.
This type of business entity can help licensed professionals protect their personal assets.
Georgia Areas We Serve
Coleman Legal Group, LLC handles cases in the following cities and communities: Atlanta, Alpharetta, Roswell, Johns Creek, Milton, Cumming, Marietta, Sandy Springs, Woodstock, Kennesaw, Gainseville, Norcross, Lawrenceville, Midtown, Inman Park, Duluth, Buckhead, Dunwoody, Vinings and Smyrna.
Our attorneys frequently handle cases for clients residing in the following counties: Fulton, Gwinnett, Forsyth, Cobb, DeKalb, Henry, Cherokee, Douglas, Carroll, Coweta, Paulding, Bartow, Hall, Barrow, Walton, Newton, Rockdale, Henry, Spalding, Fayette and Clayton.
Coleman Legal Group, LLC’s Georgia lawyers practice in the areas of Business Law, Divorce, Family Law, Immigration and Bankruptcy. We have two convenient offices located at:
Alpharetta Georgia Office
5755 North Point Parkway
Alpharetta, GA 30022
Atlanta Georgia Office
659 Auburn Avenue Northeast
Atlanta, GA 30312
Copyright © 2013 | Coleman Legal Group, LLC | All Rights Reserved. Coleman Legal Group, LLC • 5755 North Point Parkway, Suite 52 • Alpharetta, GA 30022 • 770-609-1247 DISCLAIMER: The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.
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