I have seen many articles on the Internet which state that you absolutely need to form a limited liability company (LLC) if you are a small business owner. The S corporation, once the darling of small business entities, must now feel like the red-headed step child.
But as New York attorney Derek Underwood points out LLCs are not always a good fit for the small business owner. You may be able to save on self-employment taxes by using an S corp instead of an LLC. But as Iowa accountant Joe Kristan cautions you need to be careful when you set your "reasonable" salary. Joe says the issue is given greater scrutiny by IRS auditors these days. It’s important to get advice from an accountant and/or business attorney on the issue when you make the decision about which business entity to choose.
Please note: In Derek’s post he mentions that an S corporation is usually less expensive to form than an LLC. In New York the filing fees for an LLC are considerably more than an S corp. However, in Iowa the filing fee for LLCs and S corps is currently $50.00.
photo on flickr by digitalclickclick