As I get close to the launch of LIFT, I’m going to post a little series here on expensive mistakes I see people frequently make when it comes to legal, insurance, financial and tax.
The first one has to do with one of the most common questions I get asked – should I set up my business as an S-Corp or an LLC?
In fact, this is such a common question I saw a friend of mine asking it on Twitter!
So before I answer the question, let me say this:
This is NOT a decision to be made by asking Twitter.
Okay then, if not on Twitter, how should you answer this question?
Well, to be absolutely sure about the best entity for you, you should talk with your LIFT advisors – preferably both your business lawyer and your CPA.
(One word of caution about CPAs … many of them are considering ONLY the tax consequences of incorporating and not liability protection, so if you talk to a CPA who tells you that you don’t need a business entity, reconsider that if you are building a real business.)
If you are not in a position to have a business lawyer and/or a CPA, there are a couple
things you should know before making your decision about the best entity to choose when incorporating your business …
Most business owners set up an LLC because they’ve heard that’s the simplest way to do things. And while that may be true, that can be an expensive decision.
In fact, for a business that is owned and operated by its owner (i.e. your entrepreneurial business), I almost always recommend an S-Corporation because it can save you between $2k-$5k per year on self employment taxes!
Setting up an LLC because you’ve heard it’s simple can prove to be an expensive mistake because you simply didn’t know the right thing to do.
That’s just one example of the many expensive mistakes I’ve seen business owners make when
they didn’t know what they really need for their business.
If there are any specific questions you want me to address on Thursday, let me know here in the comments. And if you’d like to receive LIVE hot seat coaching with me on the call about the LIFT Foundation in your business, let me know that too!
8 Comments
Thank you – I am sending this post to my husband to prove to him that I did the right thing by setting up an S-Corp!
LOL, that's awesome Andrea. 🙂 What was he telling you to do?
He thought LLC was better because doing the taxes was simpler.
I set up an S-corp on the recommendations of both my lawyer and my CPA. From what I understood, not only did it provide tax benefits, it provided more protection of my non-business related personal assets. (ie, my home!) In addition, he pointed out that an LLC was a relatively new business entity. Not many precedents set.
Thank you – I am sending this post to my husband to prove to him that I did the right thing by setting up an S-Corp!
Can't wait for the webinar to get more of your always-fantastic advice!
LOL, that's awesome Andrea. 🙂 What was he telling you to do?
He thought LLC was better because doing the taxes was simpler.
I set up an S-corp on the recommendations of both my lawyer and my CPA. From what I understood, not only did it provide tax benefits, it provided more protection of my non-business related personal assets. (ie, my home!) In addition, he pointed out that an LLC was a relatively new business entity. Not many precedents set.