It's time to upgrade your legal structure -- but how? LLC or Corporation? is the only book that explains each of these business structures, how they differ, and how each will affect your bottom line. Make the right decision with thorough information on:
the basics of business entities
profits, losses and tax treatment
converting from one type of business entity to another
Choose the legal entity with the best legal and tax advantages
Whether you are starting a new business or thinking about an existing one, the big question is "which legal structure is best?" The answer has important legal and tax consequences.
LLC or Corporation? explains:
the basics of all business entities
why sole proprietorships and partnerships are usually a poor choice
how to avoid being personally liable for business debts
how profits and losses are taxed in all business entities
how to convert from one business entity to another
doing business beyond your state
Making the right choice will affect your bottom line in many ways -- from what you pay in taxes to your ability to seek money from investors. LLC or Corporation? is packed with real-world examples to help you make the best choice for your company.
This edition has been thoroughly and usefully updated with the latest resources for business owners and contains completely updated information regarding the tax status of small business entities.
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Anthony Mancuso is a corporations and limited liability company expert. He graduated from Hastings College of Law in San Francisco, is a member of the California State Bar, writes books and software in the fields of corporate and LLC law, and studies advanced business taxation at Golden Gate University in San Francisco. He has also been a consultant for Silicon Valley EDA (Electronic Design Automation) companies, most recently working on a C++ open-source integrated circuit database project team. He is the author of several Nolo books on forming and operating corporations (both profit and nonprofit) and limited liability companies. His titles include Incorporate Your Business, How to Form a Nonprofit Corporation (national and California editions), Form Your Own Limited Liability Company, The Corporate Records Handbook, and LLC or Corporation? His books have shown over a quarter of a million businesses and organizations how to form a corporation or LLC. He also is a licensed helicopter pilot and has performed for years as a guitarist in many musical idioms.
1. Business Entity Basics
Why Your Choice of Entity Matters
Limited Liability Companies (LLCs)
...And the Runners-Up: Limited Partnerships, S Corporations, and RLLPs
2. Personal Liability Concerns
How Your Choice of Business Entity Affects Personal Liability
Using Insurance to Limit Liability
3. Forming and Running Your Business
Forming and Running a Sole Proprietorship
Forming and Running a Partnership
Forming and Running a Limited Liability Company
Forming and Running a Corporation
Resources for Forming an LLC or Corporation
4. Money Issues: Taxes, Profits, Losses, and Investments
Paying Out Profits
Institutional and Venture Capital
Planning for a Public Offering
5. Doing Business Out of State
Doing Business Out of State
Qualifying to Do Business
Paying and Collecting Taxes in Other States
Lawsuits in Other States
6. Converting a Sole Proprietorship to Another Entity
Converting a Sole Proprietorship to a Partnership
Converting a Sole Proprietorship to an LLC
Converting a Sole Proprietorship to a Corporation
7. Converting a Partnership to Another Entity
Converting a Partnership to a Sole Proprietorship
Converting a Partnership to an LLC
Converting a Partnership to a Corporation
8. Converting an LLC to Another Entity
Converting an LLC to a Corporation
Converting an LLC to a Sole Proprietorship
Converting an LLC to a Partnership
9. Converting, Dissolving, and Selling a Corporation
Converting a C Corporation to an S Corporation
Liquidating and Dissolving a Corporation
Selling a Corporation
10. Business Choice and Conversion Scenarios
Fast Food Fusion: A Start-Up Business Chooses a Business Form
Bill and Barbara Seek Investment From a Relative
Soaring Duck Designs Seeks Lower Taxes and a Structured Hierarchy
Silikonics Creates an Entity to Attract Outside Investors
The Surf Side: From Lunch Counter to LLC to Corporate Franchise
Appendix: State Website Information
State Business Entity Filing Websites
State Tax Office Websites
State Securities Office Websites
Your Legal Companion
One of the most important and difficult choices you make when starting a business (whether by yourself or with others) is trying to figure out whether a limited liability company (LLC) or corporation will best meet your needs. An equally difficult decision occurs if you have already organized your business but want to explore the possibility of converting to a business entity with more favorable legal and tax characteristics.
In both cases, this book will help you with your decision.
Although the focus of this book is on choosing whether to form an LLC or corporation, you cannot make an informed decision without learning about all the types of business entities—including sole proprietorships, partnerships, LLCs, and corporations. This book explains the legal and tax characteristics of each of these business entities and the basic rules for converting one type of business to another.
This book also provides information about some of the less well-known ways of structuring a business. For example, two legal spin-offs of the basic partnership form—the limited partnership and the registered limited liability partnership—are discussed. This book also covers S corporations, which have some characteristics of the more well-known C corporation (including limited liability) but are taxed like a partnership.
I’ve divided this book into two parts.
Part One discusses basic information about each type of business entity. It includes the following chapters:
Chapter 1 discusses each type of business entity, including the relative advantages and disadvantages of each.
Chapter 2 explains how your choice of entities affects your personal liability for debts against your business.
Chapter 3 examines the relative ease with which each of the entities can be formed and managed.
Chapter 4 covers how each entity deals with profits, losses, investments, and taxes.
Chapter 5 explains how doing business out of state may affect your choice of entity.
Part Two includes the following chapters:
Chapter 6 discusses converting a sole proprietorship to another entity.
Chapter 7 discusses converting a partnership to another entity.
Chapter 8 discusses converting a limited liability company to another entity.
Chapter 9 discusses converting a corporation to another entity, and reorganizing or dissolving a corporation.
Chapter 10 provides examples of various conversion scenarios discussed in previous chapters.
This book also includes links you can use to find information regarding your state’s corporate and LLC rules, as well as tax and securities laws information (see the appendix).
Business law and tax rules can get a bit complicated. Don’t worry. They’re presented here in real-life contexts, without off-putting legal or tax jargon, and without the technicalities best left to legal and tax professionals. By the time you finish this book, you’ll understand what each type of entity has to offer, and you’ll be ready to choose the right structure for your company. By the way, Nolo (www.nolo.com), the publisher of this book, provides many ways to assist you when it comes to corporations and LLCs, including assistance with state filings, helpful books, and lots of free information. Visit the site and click “Business Formation,” on the left side of the home page.
Get Updates and More at This Book’s Companion Page
When there are important changes to the information in this book, we’ll post updates at a special URL that is included in this book when you purchase it. You will also find other helpful information there including interviews with the author, Anthony Mancuso.