LLC vs. Corporation vs. Sole Proprietorship: Form an LLC (3/11)

[@llcuniversity]

Hey folks, make sure to check the site for most up-to-date information: www.llcuniversity.com/llc-vs-sole-proprietorship-vs-corporation/. Or select your state and start forming your LLC with our free guides: www.llcuniversity.com/

[@domingoscussinja7176]

No explanation can be clear than the crystallization of this video. Greate job Sir.

[@llcuniversity]

Thanks so much Domingos!

[@johnnietaylor5683]

Simple to understand. Informative. Entertaining. Short segments. What else can I say. This guy is great.

[@llcuniversity]

You rock Johnnie!! Thanks for the awesome comment ;)

[@yashveermangar779]

Just the piece of information i needed. Straight-forward and simple. Thank you so much sir.

[@llcuniversity]

You're very welcome! Thanks for the nice comment :)

[@KitchenTipsOnline]

Thumbs up excellent video! To the point without all the fluff. I watched a couple other videos and yours is the best explanation on why an LLC, is best for most folks.

[@llcuniversity]

Thank you! Really appreciate the kind words :) Checked out your channel.. really cool videos! Cheers!

[@stc2828]

Sounds good, I am starting a c Corp. Start Big or Go Home!

[@llcuniversity]

I like the way you think ;)

[@YakMotley]

Awesome video! Thanks for the information!

[@llcuniversity]

You're welcome Yak!

[@mysticalrose1414]

I love your videos. I love how you don't talk to fast.

[@llcuniversity]

Thanks Mike! Glad they are helpful. This one is a bit slower (I'm using a teleprompter). There are some others though where I'm just talking and they are a bit faster.

[@IgorSilva-fh2pr]

Thank you for the awesome video. Very well explained! Cheers!

[@llcuniversity]

Igor, awesome! Glad it was helpful!! What did you end up choosing, and what state are you or the business in?

[@IgorSilva-fh2pr]

thanks for the quick response! I'm looking to start an online service business. similar to Under. the same applies for online businesses ,correct?

[@llcuniversity]

You're welcome :) Yes, definitely, same applies for online businesses. The conversation I think is really about LLC vs Corporation. I don't ever recommend Sole Proprietorship. They offer no protection. And LLCs and Corps aren't that expensive if you file yourself. Hope that helps. Let me know if you have any questions.

[@IgorSilva-fh2pr]

thank you so much!

[@llcuniversity]

You're welcome man!

[@jcjc3914]

GREAT VIDEO I love how straight forward he is and simple

[@llcuniversity]

Thanks JC!

[@rc9266]

I have concluded the following. A 2 man LLC gets a default status as a partnership is what I am understanding when attempting to limit liability against nefarious litigation. Then in filling out a w9 as an LLC to work as a service provider the status there would also be checked off as an LLC partnership, and in the event of legal action against the LLC it is better to be a partnership than a sole proprietor. Otherwise you still can be sued as a sole proprietor.

[@llcuniversity]

This is incorrect. The LLC being taxed as a Sole Proprietorship or Partnership has nothing to do with the LLC's liability protection. It's simply how the IRS treats the LLC as a tax entity for federal tax purposes. Hope that helps.

[@celestinozamora9258]

If an LLC files form 8832 to be taxed as a C corp, and decides to later issue stock, where does the LLC specify how many shares are authorized, do they just amended the operating agreement to reflect how many shares or authorized,or do they have to create a separate document similar to an articles of incorporation which specifies the number and type of stock to be issued?

[@llcuniversity]

Hi Celestino, the LLC can't issue stock (regardless of federal taxation). It's still an LLC, so it will be working with LLC membership interest. Changes to LLC membership interest would take place via an Assignment of LLC Membership Interest and an amended Operating Agreement. Hope that helps.

[@Carpexcarpe]

I am so lost 🙃. I am in the transition of purchasing my LLC, and I still can't fully grasp what it initially means, other than claiming my business name and EIN upon approval. Please kindly advise

[@anthony73125]

basically an llc seperates you and your ASSets in a lawsuit(say someone is suing you) from being seized or repossed or touched and can only target your business assets only. hope it helps

[@anthony73125]

I might add your assets are typically what would be your personal belongings eg. cars, house, rolex, purse...

[@Carpexcarpe]

It definitely did, thanks so much

[@llcuniversity]

Thanks Tito!

[@llcuniversity]

Hi Courtney, I also recommend checking out our Learning Center videos and articles (www.llcuniversity.com/learning-center/). It'll help you wrap your head around everything.

[@shahidasohail8947]

Yes I am trying to find what type of business structure an existing company is using. Let’s say ABC construction enterprises.

[@llcuniversity]

Ah, I see. Well, in this case, since there's no designator (Inc, LLC, LP, etc), there is a chance this is a DBA (www.llcuniversity.com/dba/do-i-need-to-file-a-dba/)... or the company could be leaving it out where you are seeing it. Do you know what state the business is in? If so, you can search the company name on the Secretary of State (or equivalent) database. You can find those links on this page: www.llcuniversity.com/50-secretary-of-state-sos-business-entity-search/. Hope that helps!

[@billy-g6240]

@LLC University Great video 🔥 Thank You !!!

[@llcuniversity]

Thank you Billy! You're very welcome :)

[@mustafadahha3533]

an LLC is good for real estate but not for regular business. it does not provide any tax benefit. you still need to file a schedule C, same as a sole proprietor . A single owner C-Corp filing as an S-Corp is the best option. you save on social security tax and no double taxation. lawyers like LLCs because they can charge more to form one and draft the operation agreement.

[@llcuniversity]

Hi Mustafa, both a C-Corporation and an LLC can elect to be taxed as an S-Corporation (www.llcuniversity.com/irs/llc-taxed-as-s-corp-form-2553/). For that reason, an LLC with S-Corp election is more common as the LLC is easier to manage. Hope that helps.

[@bleacherz7503]

What form do we use to elect an S Corp, Entity for a single person California, LLC. Is there a state and federal form?

[@llcuniversity]

For a California LLC, there is just a federal form (the state honors the federal taxation). We have information for an LLC taxed as an S-Corp here: www.llcuniversity.com/irs/llc-taxed-as-s-corp-form-2553/

[@shahidasohail8947]

Hi , I was just trying to figure out what reflects behind enterprises. Is it L.L.C or corporation or sole proprietorship As for example. ABC construction enterprises. Thanks for your response.

[@llcuniversity]

Hi Shahida, I still don't understand what you mean by "reflects behind". Do you mean what should a construction company choose? Or are you trying to find out what type of business structure an existing company is using?

[@Nikki_Thee_Broad]

Hi! Thank you for this video. Do you have any advice for those of us interested in forming a hybrid LLC or L3C? I specifically want to start one in Arizona. Thanks!

[@llcuniversity]

Hi Anneka, you're welcome! We don't over L3Cs at this time.

[@mkn.567]

Recent advice that I've received from a lawyer with very good credentials is that nowadays (thanks to changes in the law) a single shareholder corporation is comparable to a single-member LLC. The corporation model was favored because I wouldn't have to pay hefty publication fees (i'm in new york). Any thoughts on that advice.

[@llcuniversity]

Hey Mario, check out our New York LLC course: www.llcuniversity.com/new-york-llc/ (specifically lesson 2). We discuss how to save upwards of $1,000 by following a publication strategy. This allows you still operate as an LLC and avoid the extra requirements of operating as a Corporation. Hope that helps.

[@priscillaayala5225]

Corporation- double taxation, elect board members, corporate officers and issue shares. Sole proprietorship - 0 tax benefit + all liability LLC- hybrid of both corporate & sole proprietorship but without the disadvantage of double taxation

[@malek2001.]

Hey Priscilla, Just need clarity So having a LLC even if you don’t have a business but just buying a home is best?

[@priscillaayala5225]

@@malek2001. depending if it’s a residential home you’re interested in purchasing or an investment home

[@llcuniversity]

Nice summary!!

[@LemonGuy-v1i]

I am starting a home based business. Making handcrafted items for sale. What do you suggest? Sole Proprietor or LLC?

[@llcuniversity]

Hey there, we pretty much never recommend Sole Proprietorship since an LLC is not that expensive and it offers so much more personal liability protection. And... a Single-Member LLC is taxed just like a Sole Proprietorship... in fact, the IRS treats a Single-Member LLC like a Sole Proprietorship for tax purposes. Hope that helps!

[@jimross2101]

You need to also say most LLC's will pay self-employment taxes of 15.3% up to an annual net income threshold and then 2.9% once they exceed that figure every year.

[@llcuniversity]

You are correct. This video was just an overview... and frankly, we shot it many years ago before we got better at being more comprehensive. However, we do cover LLCs being taxed as S-Corporations (and other types of tax elections) on our website. Thanks for your comment.

[@RuizBrosProductions]

What do you recommend for Wholesaling/Flipping? A S-Corp or a LLC? I was told a S-Corp is better because of tax reasons but if a LLC can be taxed as a S-Corp, wouldn't it be the same? Can I do distributions through a LLC without self employment tax?

[@llcuniversity]

Hey Felix, this is a more in depth conversation you'll need to have with a few accountants, but here's the overview. You can't "form" S-Corp like you form an LLC. S-Corp is a "tax layer" that "sits on top of" an existing entity, like an LLC or C-Corporation. The conversation to have with an accountant is LLC vs LLC taxed as S-Corp. Typically, most accountants will recommend your net income to be around $70k to make the S election worth the extra administrative costs (payroll, corporate return, and accountant's time). For a single-member LLC in its default tax status (taxed as a Sole Proprietorship), earnings are subject to self-employment tax. Hope that helps.

[@RuizBrosProductions]

Yeah. Thanks for the reply!

[@Romulus2099]

Hello, thank you so much for all the value information. I was wondering, would it be possible to form a holdings company through an LLC that would protect me personal assets such as my investing and retirement accounts? Thank again so much!

[@llcuniversity]

Hey, thanks for the kind words. You're very welcome. Asset protection is usually not a "black and white" strategy. So it's challenging to say "yes" or "no". It depends on the details. We recommend speaking with a few different asset protection attorneys to develop a comprehensive strategy. Having said that, an LLC owning another LLC can offer additional asset protection. But again, it does depends on the details of how it's executed. For example, whether you're single or married, what state you reside in, and other items. Hope that helps a bit though.

[@Romulus2099]

@@llcuniversity yeah, I figured it was probably a bit more complicated than that. Haha thank you so much for reaching out to me and answering my questions. Your videos have certainly gotten the gears turnimg, I will for sure have to talk to an attorney in the near future. Thank you again so much for all the valuable content!

[@llcuniversity]

LOL - I wish there were simpler ways sometimes. You're very welcome Nico. So awesome you're digging the videos and finding them helpful. That's great to hear :) You're welcome!

[@scubasteve5659]

I build custom computers in my garage, live with my parents and have no car. I just want a business name so I can make an email address and maybe a website later and want to get more professional with this. 90% of all the components I work with have 3-5 year warranties as well. I think for sake of simplicity a sole proprietorship is right for me, also that would save a few hundred on llc filing fee. I think I could also turn it into an llc later. anyone have any advice?

[@llcuniversity]

Hey Steve, that can certainly be done. We've written about that here: www.llcuniversity.com/change-convert-sole-proprietorship-to-llc/. Hope that helps.

[@alexanderchenf1]

Thanks. I am a successful stock investor with $192,000 in total gains ($139,296 of which is unrealized) since 10/30/19. Since I have been trading under my own SSN - a sole proprietorship, I almost have no expense to claim for tax deduction for the coming April 2020 according to the current statutes. I trade at my leased home in Washington State. I am thinking of setting up an LLC in WA so that I can claim my lease and related expenses as home office expense. What do you think?

[@llcuniversity]

Hello, you will still be able to claim your lease (a portion of square footage) and home office expenses if you work from home. The LLC isn't needed for that, since by default, a Single-Member LLC is taxed like a Sole Proprietorship anyway. Best to have a few conversations with a few different accounts to dig into the details though. Hope that helps!

[@alexanderchenf1]

@@llcuniversity Thank you

[@Hunt872]

Hi I have a question so I just recently learned about llc and I have already received my business license and my ein number for my business which in an online boutique and filed as a sole proprietorship and I’m considering of switching to an llc what steps would I have to take to switch everything over ?

[@llcuniversity]

Hey Brittany, we have instructions on switching from a Sole Proprietorship to an LLC here: www.llcuniversity.com/change-convert-sole-proprietorship-to-llc/. Hope that helps!

[@imtrimandconstructioninc8731]

i have a question. i have a llc. but my account said is better for me a corporation. but i think that is too much tax that i have to pay. and i don't have a big company.

[@llcuniversity]

Hi Mayra, please provide some more information about your business and how it is setup. I don't fully understand exactly what you are asking. Taxes all depend on what type of business industry you're in and how your LLC is taxed with the IRS.

[@billy-g6240]

@LLC University Do I have to form the LLC first and get approve before I apply for the EIN?

[@llcuniversity]

Hi Billy, it is best to wait for your LLC to be approved before applying for the EIN for your LLC (www.llcuniversity.com/irs/ein-for-llc/).

[@billy-g6240]

@@llcuniversity Thank You!!!

[@llcuniversity]

@@billy-g6240 - You're welcome Billy!!

[@emilianomarinogalli3818]

Hello... very instructive video... I wanted to know if I hear you well... sole proprietorship do not pay taxes as a business but the owner does pay??? How much money can I make with a sole or with a llc?? Thank you very much and I am sorry if you already explained this

[@llcuniversity]

More specifically, a single-member LLC (which is taxed by the IRS as a Sole Proprietorship) does not pay corporate taxes at the federal level (unlike a Corporation, which does). Rather, the income/loss/credits/deductions flow through to your personal 1040 federal return. How much money can you make with a Sole Proprietorship or LLC? There's no limit my friend. As much as you can !! ;-)

[@claudineservice7907]

hey if I am opening a fast food restaurant can I open a multi member llc to protect my asset. and can I form a llc/ multi member llc and don't have any limited partner/ partner to put in money and if it's a must to have shares

[@llcuniversity]

I don't understand your question and can't tell how many questions are here. Can you rephrase please and use punctuation between thoughts. Thanks ;)

[@claudineservice7907]

LLC University if I am opening a fast food restaurant can I open a multi member llc to protect my asset? and can I form a multi member llc and don't have any limited partner/ partner to put in money? and if it's a must to have shares wen opening a multi member llc?

[@llcuniversity]

LLCs don't utilize shares. They have membership interests. Membership interest is usually expressed in percentages, although you can use units (similar to shares). You can own all membership interest (100% ownership). You don't have to have partners (other LLC members).

[@claudineservice7907]

I finally know what llc means I want to open my restaurant and it would have a general partner and a limited partner but I didn't know that by using that for my business I would not protect my own or private asset.

[@llcuniversity]

You may want to speak with a local attorney regarding what is best. LLC's are popular for restaurants, but you might want to compare it with a Limited Partnership if you're looking to have money partners. There are pros and cons to each setup. Apologies I can't be more specific.

[@claudineservice7907]

LLC University I don't want to have alot of partners and I want to protect my own asset from bankruptcy can limited partnership do that and if I use llc is it a must to have a partner

[@llcuniversity]

If you form an LLC, you don't have to have a partner. You can form a single-member LLC. Both an LLC and a Limited Partnership can protect your personal assets (depending on how the LP is setup).

[@claudineservice7907]

LLC University thank you thank so much thank u

[@claudineservice7907]

do u have a video explaining single llc

[@caddark9412]

What is the best business structure for a 15 year old? I'm not worried about the time or effort I have to put into it I'm homeschooled so I have time I'm just worried about the legal issues of being a minor and trying to manage a business entity. also what are the issues that I should be worried about?

[@llcuniversity]

I would go LLC or Sole Proprietorship. What state are you in? Most states don't have specific laws about allowing/disallowing a minor to form an LLC. I'll check your state for you. Other issues arise re: minors entering contracts. However, if you keep your business simple (not a lot of contract agreements + don't get sued) you'll be 18 soon enough.

[@caddark9412]

LLC University I live in Indiana. I'm sorry for not replying sooner I did not expect you to reply so fast

[@llcuniversity]

All good man ;) Just checked the Indiana LLC act (iga.in.gov/static-documents/5/f/b/7/5fb7128f/TITLE23_AR18_ar18.pdf). I couldn't find anything that expressly prohibits minors from forming LLCs. You may want to check with a local attorney though to be sure. You can use our 'knights of the roundtable' strategy for that research outline here: www.llcuniversity.com/how-to-find-an-accountant-for-your-llc/. Hope that helps :)

[@caddark9412]

LLC University thank you!

[@llcuniversity]

You're welcome!

[@shahidasohail8947]

Hi, thanks for easy to understand videos. Excellent job. Very very helpful videos. I have a question. If we say construction enterprise. How should we take enterprise as. I means which category it comes in . Like sole proprietorship or something else. Is this legal entity protects our personal assets. If you can please answer my question . I will appreciate very much.

[@llcuniversity]

Hi Shahida, I don't fully understand your question. Can you rephrase? The choice of which business entity/structure you use is up to you. Having said that, constructions businesses usually have more risk, so it's not common to see someone operate that as a Sole Proprietorship. Hope that helps.

[@antsatch8111]

Corps are not double taxed dude. Do more research. Only if you pay dividends. But you do not suppose to pay yourself like that. You should pay yourself a salary instead or reimbursement. Only dividends are double taxed. You use SALARY or REIMBURSEMENTS to pay yourself. You don't have to be double taxed, only if you paying yourself dividends which you don't have to do.

[@llcuniversity]

Hey Ant, thanks for your comments. We have info on LLC taxed as an S-Corp on our website (www.llcuniversity.com/irs/llc-taxed-as-s-corp-form-2553/) which goes into salaries and distributions. This video is a part of our intro series.

[@cyrusIIIII]

Is a single member LLC who files taxes on Schedule C still protected? (protection of assets I mean in case of law sue)

[@llcuniversity]

The way an LLC is taxed does not affect the legal/liability protection. A lot of viewers hear that their LLC (single-member LLCs that is) is taxed as a Sole Proprietorship and the only word they hear is "Sole Proprietorship" not "TAXED AS". The IRS is simply treating the LLC like a Sole Proprietorship for tax purposes... but again, this does not affect the personal liability protection of the LLC.

[@Entertainment_Chilli]

Hi, I'm an Indian. I want to start my own Cosmetic company. Which country is best for investment Singapore LTD., LLC US or Canadian corporation ? Which country is more beneficial ? Please suggest.... I wanna invest in Foreign. 💯

[@llcuniversity]

Hi Ayushi, this is not something we can comment on. We don't deal with jurisdictions outside of the US at this time. Thank you for your understanding.

[@isidibe8814]

Thank you for the information

[@llcuniversity]

You're welcome!

[@karlaquinte2830]

Please help me. My sister and I recently filed a DBA in Florida to start a online clothing store, we decided to go for a partnership as there’s no need yo register a general partnership in Florida, if it grows we’ll become an LLC. But we’re having problems when applying for an EIN, as the application asks for a “legal name of the partnership” , would this be our last names or our fictitious name?

[@llcuniversity]

Hi Karla, the "legal name of the Partnership" should match what you have in your Partnership Agreement (if applicable). It'll be both of your names. Example: Sally Doe and Karla Doe. Hope that helps.

[@orlandowilliams5309]

HOW DO YOU STOP YOUR SOS FROM DEFAULTING YOUR LLC INTO A SOLE PROPRIETOR BEFOR THE 75 DAYS IS UP

[@llcuniversity]

The Secretary of State has no ability to affect the taxation of an LLC. It's the IRS, that by default, treats an LLC in a certain way. For example: By default, the IRS treats a Single-Member LLC like a Sole Proprietorship for federal income tax purpose. And a Multi-Member LLC like a Partnership for federal income tax purposes. It sounds like you're referring to an LLC making an S-Corporation tax election. We cover that here: www.llcuniversity.com/irs/llc-taxed-as-s-corp-form-2553/

[@orlandowilliams5309]

Thanks for all your hard work in providing valuable information for ppl to succeed in the business industry . I am truly grateful 🙏 ✨ LLC UNIVERSITY.

[@llcuniversity]

@@orlandowilliams5309 - Thank you so much Orlando! I appreciate the kind words. You're super welcome man :)

[@EMPujols]

You're the man.

[@llcuniversity]

Thanks!

[@TheSuperStarCarWash]

THUMBS DOWN... Very BAD advice!

[@llcuniversity]

Hey Steven, what can we improve?

[@ethanhunt2570]

Really? Howcome?

[@rc9266]

Why?

[@bleacherz7503]

What form do we use to elect an S Corp, Entity for a single person California, LLC. Is there a state and federal form?

[@llcuniversity]

Hello, the form to use is Form 2553. It is a federal form. California will honor the federal tax treatment of your LLC. We have more information here: www.llcuniversity.com/irs/llc-taxed-as-s-corp-form-2553/