Starting a Small Business/llc

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Question
I am starting a social media magazine. Every day about 3 new articles will appear and each article will have a few images. I want personal protection in case some company says we copied their articles or images illegally or for any other reason. We also want tax advantages. Finally, simplicity of maintenance is important. what do you recommend, LLC, S or something else?

Answer
First of all, if you personally infringe someone's copyright, you can be personally liable for your infringement even if you have a limited liability entity such as a corporation or an LLC.  An entity does offer some protection, particularly if the infringement is done my someone other than you (such as a freelancer hired by the company).  You may want to check out my article How Limited is Limited Liability?.

Either a corporation or an LLC works fine as far as limiting your liability. In that respect, they are basically the same.

As the tax advantages, there are no special tax advantages from operating an LLC, but a single member LLC is treated as a disregarded entity for federal income tax purposes which means that you save time by not having to file a separate return for the LLC (and and you save money if you pay someone to prepare your returns).

Under some circumstances, a regular corporation can reduce taxes, at least on a current basis, because it has its own graduated tax rates which at the lowest levels are lower than the rates on many high income individuals.  That allows a corporation to retain some capital at a reduced after-tax cost. An S corporation can also save taxes under certain circumstances.  All income from an LLC is treated as self-employment income and subject to FICA taxes, while an S corporation can treat amounts in excess of the owner's reasonable compensation as business profits which are not subject to FICA taxes.  

Without knowing your specific tax situation and future plans for the business, it is impossible to generalize that one form of entity is better than another.

For simplicity, an LLC does hold a slight advantage over a corporation. An LLC is not required to hold meetings of members or to maintain corporate minutes. A corporation, the other hand, must hold annual meetings of shareholders to elect directors and annual meetings of directors to elect officers and take any other corporate action. Those meetings must be reflected in minutes which are recorded in the corporation's minute book.

I hope this helps. Good luck with your new business.

David

Starting a Small Business

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David K. Staub

Expertise

I am a business and tax attorney and have spent more than 35 years assisting people in starting a wide variety of businesses. I can answer questions about the basic differences between the various entities available to new businesses, including limited liability companies, corporations, S corporations and partnerships. I can provide guidance in other areas facing start ups, such as hiring employees, signing contracts and obtaining necessary licenses. I can also direct people to sources for answers to specific legal questions which cannot be answered in a forum of this nature.

Experience

I have an extensive practice in the mergers and acquisitions area and have been involved in the tax and legal issues on hundreds of business transactions.

Website
Staub Anderson LLC
Illinois business attorneys

Practice Areas
Business Organizations
-Corporations

-LLCs
-Partnerships

-Joint ventures
Mergers & Acquisitions
-Buying/selling business
Securities Law
Tax Law
Technology Law
-Software licenses
-Development agreements

Trademarks

Organizations
Illinois State Bar Association; Chicago Bar Association (former Chairman of the Corporation & Business Law Committee and former Chairman of the Mergers and Acquisitions Subcommittee; former Executive Committee member, Federal Tax Committee and Chairman of subcommittee on general tax issues); Keystone Foundation (Trustee); Association for Corporate Growth; Midwest Entrepreneur Forum; Midwest Association of Alpha Delta Phi

Publications
Commerce Magazine; YLS Journal; ISBA Section of Taxation Newsletter

Education/Credentials
Harvard Law School, J.D., 1977; University of Illinois, B.S. in Accounting, with highest honors, 1974

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