LLC or S-Corp? 4 Questions to Ask Your CPA

When registering a business as a corporation, you are faced with a tough choice: registering it as an LLC (Limited Liability Corporation) or as an S-corporation. These 2 options are great options for small businesses because registering as a traditional C corporation can be overkill for most businesses that are just getting started. Are you wondering which between the 2 options you should choose? The experts at BW James present 4 things you must ask your CPA to help with your decision-making.

Which system provides a more structured system? – A structured system is necessary for businesses that are on the rise. Generally speaking, an LLC has a more free-willing system when it comes to task delegations while an S-corporation has compliance requirements such as a board of directors, shareholder meetings, annual reports, and the like.

What are the limits when it comes to shareholder jurisdiction? – Each of these corporations holds particular rules when it comes to delegating power between shareholders. For example, one crucial restriction for S-corporations is that only US citizens can be shareholders in an S-corporation. On the other hand, LLC owners are not allowed to use their company or stocks for personal affairs.

How are income and wages allocated to stockholders and employees? – There are crucial differences between an LLC and an S-corporation when it comes to income. For example, the dividing of income shares between shareholders of an LLC is based on the pro-rated shares of each shareholder. How money is distributed is something you must ask your CPA about.

How are taxes paid?  - Understanding how taxes work for each arrangement can be a complicated task to handle. This is where your CPA can come into the picture. For example, stockholders of LLC corporations are required to pay self-employment tax as part of their income while stockholders of S-corporations are required to pay additional state taxes.

For more information about the professionals at BW James visit http://www.bwjames.com