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LLC or S Corporation
Old 02-13-2006, 07:07 PM   #1 (permalink)
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When I have tough questions about photography, I always come to GG.

So far I've been operating my photography as a sole proprietership but I'm seriously considering either changing to a LLC or an S Corporation.

Does anyone have any suggestions on which is best for a freelance photographer?

Michael



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I would suggest an LLC
Old 02-13-2006, 09:11 PM   #2 (permalink)
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An LLC gives you a liability sheild similar to an S corp but, a single-member LLC is easier to set-up (in many states it can literally be set-up with simple form and a small registration fee). Both entities give you the benefits of pass-through taxation (business is taxed at personal level not business level -- ie no double tax).

Keep in mind that just because you have and S Corp or an LLC, while the liabability shield can be helpful in many circumstances, it won't shield you from liability if you, say, drop a light on a model's head...... She/he will sue the LLC AND YOU personnally. Now, if an employee of yours drops a light on a model's head, the S/LLC structure will help protect your personal assets.

You should consult an attorney (tax and business) for any fine differences with S vs LLC

Dave
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Finally a topic that I can speak intelligently on...
Old 02-13-2006, 10:36 PM   #3 (permalink)
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Dave is correct. From what you have said, an LLC offers you all of the meaningful benefits of an S Corp. without the expense of the S Corp. Also, depending upon how your company grows in time, by maintaining your LLC status you grant yourself greater flexibilitiy in the future. While I am not a small business attorney recognized by the State Bar Association of Texas, the LLC designation and a good personal liability insurance policy ($1-2 Million) should provide ample coverage at very modest cost.

A good small business attorney and accountant will be your best friends. I always worry far more about payroll and tax filing than I do the liability, as they haven't created a business structure or insurance policy that gets your butt out of hock with the IRS.

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Re: LLC or S Corporation
Old 02-14-2006, 08:47 AM   #4 (permalink)
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Thats a CPA question who's familiar with your states taxing laws. My CPA advised me to a SubS...and I have 3 now...he explained all of the ins and outs and its...half a dozen one way...and 6 the other...Point is, they both offer the pass through of taxable income...

I purchased an umbrella policy from my insurance carrier...$5 million and is VERY inexpensive...you should speak to an insurance agent about one that may be right for you..it offers some strong safety nets in many areas
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Re: LLC or S Corporation
Old 02-14-2006, 08:57 AM   #5 (permalink)
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When I had my Farrier business going, I went the S Corporation route. But, in saying that, here in Tx. it would be best not only talking to a CPA, but also a lawyer as many of the laws have changed here. All thanks to George W., including some of the insurance issues from what I hear.
I know it's an Apple and Oranges comparison but it's best to check with those that really know the in's and out's on this.
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Re: LLC or S Corporation
Old 02-14-2006, 10:19 AM   #6 (permalink)
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While an LLC is much simpler, depending on your business growth, an S Corp will allow contributions to be made to a Keogh plan, where an LLC may only allow IRA type contributions. This only becomes a concern if you have enough income to actually "defer" some of it.

A tax professional can advise you as to the options, but in most regards, an LLC provides the same benefits as an S Corp, without the additional busy work.

Mark
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Re: LLC or S Corporation
Old 02-14-2006, 06:35 PM   #7 (permalink)
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I dont know about other states, but here in Michigan when I set up an LLC a year ago, we also designated it an S Corp. I dont really recall why other then that is what the attorney and CPA involved in the deal reccomended. I do recall having to fill out the forms for both though. I have also set up corporations that were also S corps and the big benefit of the LLC was less anual paperwork. With a Corp you have to do annual reports and minutes and file them with the state even when it is designated an S corp.
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