Legal Question in Business Law in California

Re: S-Corp. vs. LLC

Substantially insufficient information to advise anyone this steals with economics, taxes and the financial condition of each of the individual's participating in this project. Find it attorney who has an expertise in business/corporate, etc. work in goal in as a group to determine if you want to hire this person and find out your alternatives. To start a business you need a very good attorney and a very good CPA. The money you put out is a valuable in the end and necessary in the beginning. Therefore, don't be cheaper skates as your only cheating your self.I have been practicing law in the San Francisco Bay area for approximately 35 years and expert in the area in the category in which your question is placed. I feel I can help you in this matter and if you wish to consult with me please contact me at 925-945- 6000.

Re: S-Corp. vs. LLC

If all three members wish to be managing members, an LLC should suffice. Call me directly at (619) 222-3504.

Re: S-Corp. vs. LLC

After discussing this issue with dozens of start-up businesses, I think it's fair to say that for 95% of new businesses it makes very little difference and your decision could be based upon something as trivial as the way the name looks and sounds. However, let me give you a few examples of differences:

1. An S corporation cannot have certain classes of persons or entities as shareholders, for example, no non-resident alien may own S corp. stock. Such businesses should be formed as LLCs.

2. There is an additional tax on the revenues (gross sales) of LLCs. Businesses that have high volume and thin margins might find this enough to suggest use of an S corporation instead of an LLC.

3. Certain losses that cannot be deducted by S corporation shareholders can be deducted by LLC members. This feature kicks in to benefit the LLC form in farming and real estate businesses, for example, that have lots of real-estate backed debt, and research companies that expect to have large losses in their initial years while doing R&D with no product to sell.

4. LLCs are organizationally a little more flexible, but on the other hand may require the founders' attorney to do a little more document-drafting work.

5. Arranging certain kinds of financing for a corporation may be easier than for an LLC, but on the other hand, investors in or lenders to either an LLC or S corp. will be looking at the credit worthiness of the company founders.

In many cases, a CPA or tax expert should choose the form, rather than the attorney, unless the attorney is also a tax specialist.

Entity selection is fairly important, but perhaps even more important is establishing and documenting the relationship between the founders. Forming the entity is child's play in comparison with relationship documents such as a buy-sell agreement and contracts covering capital contribution, services and employment of the founders, officer titles and authority, and all that other power and money stuff.

Re: S-Corp. vs. LLC

depends, but probably an S-corp. with what you are planning in the future, you three should really invest in having competent counsel and accountants guide you. please call if you like. thank you.

Re: S-Corp. vs. LLC

My answer addresses only the franchising aspect (franchise the business at a future time). When you reach that point, you will want to start a new entity to handle the offer and sale of franchises. You can obtain more informaton at my website www.franchisefoundations.com about this and other pre-franchise planning issues. Good luck - Mr. Franchise