Is LLC best way to go?

by Gayla
(Texas)

Is an LLC the best way to go for elderly household and education services business or should I go with an S-Corporation or even try for a nonprofit corporation (if we drop the household services and just go with education)?

Answer

A non-profit will have more hoops to jump through than a for-profit LLC or s-corporation. Does your business actually qualify as a non-profit?

As to LLC vs. S-corporation, each has its disadvantages and advantages. There are ways to somewhat lessen self-employment taxes with an S-corporation, though you do not eliminate them entirely--and it comes at the cost of having the IRS second-guess what a "reasonable" wage is to pay yourself.

In addition, there are restrictions on the type of shareholders in an S-corporation (only natural persons who are US citizens), and you cannot have multiple classes of ownership in an S-corporation.

An LLC is extremely flexible, and can, in fact, be taxed as an S-corporation (however, the LLC must comply with all S-corporation rules in order to maintain S-corporation tax status).

Therefore, you need to consider your goals and requirements to determine the best entity for your needs.