Launching a business? Make sure to file your entity with the state. If you are unsure whether to file for an S-Corp or LLC, we have some information that you may find helpful. Both S-Corps and LLCs have advantages and disadvantages, and both offer legal protections. It doesn’t cost a lot to file for an LLC. An Articles of Organization costs only $125 with the state of North Carolina and you can do it easily online. With an LLC, taxes are simplified. You pay taxes quarterly then file an annual return at tax time.
Another positive, by filing for an LLC, you will legally separate your business assets from your personal assets. If you are ever in a dispute or sued, your business will be responsible for any debts not you. There are exceptions to this rule but only in cases of proven wrongdoing. If you estimate your annual profits will be below $80,000 filing for an LLC will be fine. Once you are consistently profiting over $80,000 annually you may want to consider switching to an S-Corp.
S-Corps are more expensive to setup but are very similar to LLCs in the sense that they are pass-through entities offering the protection of a corporation. Because taxes are paid monthly, there is a lot of paperwork involved with an S-Corp and monthly and annual costs that LLCs don’t face. Yet keep in mind that, as owner, you can take your pay in the form of a distribution to help lower your self-employment tax liability.
Before launching your business and committing to either an S-Corp or LLC, we encourage you to contact us. At Alloy Wealth, we have a passion for helping small business owners achieve their personal and professional financial goals. We’d love to help you create a strategy to ensure your long-term success! Call 800-689-3935 to schedule an appointment with one of our fiduciaries.