wood burning stoves 2.0*
The moose likes Jobs Discussion and the fly likes starting consulting corp, LLC ok? Big Moose Saloon
  Search | Java FAQ | Recent Topics | Flagged Topics | Hot Topics | Zero Replies
Register / Login


Win a copy of Murach's Java Servlets and JSP this week in the Servlets forum!
JavaRanch » Java Forums » Careers » Jobs Discussion
Bookmark "starting consulting corp, LLC ok?" Watch "starting consulting corp, LLC ok?" New topic
Author

starting consulting corp, LLC ok?

John Ranaudo
Ranch Hand

Joined: Sep 23, 2003
Posts: 31
I am currenty an independent consultant and am incorporated, but it seems to be better to be an LLC rather than a full blown corp.

Do the firms (headhunters) out there deal with LLC's? Would this be a problem?

I am trying to figure out if I can convert my corp. to a LLC or start a new
LLC corp.

PS. anyone know of message boards for computer consultants?

Thanks.

Kj Reddy
Ranch Hand

Joined: Sep 20, 2003
Posts: 1704
What is LLC?
Biprajit Das
Greenhorn

Joined: Jun 14, 2005
Posts: 3
For KJ Reddy's info LLC stands for Limited Liability Company.
===========
For John:

A limited liability company, or LLC, is a relatively new form of business organization that is certainly worth consideration. It has several features that create favorable tax treatments, as well as protection from personal liability. Since the status of the LLC form of organization varies somewhat from state to state, be certain to find out how your state's law applies.

The LLC allows for multiple owners, or members, who enjoy limited liability, as well as a managing member, who also enjoys limited liability and typically is the person responsible for managing the business. The profits or losses of the business pass directly through to the owner's personal income tax return, Form 1040. The LLC files a Form 1065, and then lists each member's taxable profit on Form K-1. The bottom-line profit of the business is not considered to be earned income to the members, and therefore is not subject to self-employment tax.

The following are advantages of the LLC form of business organization:

* An LLC allows for an unlimited number of members; however, if the LLC has just one owner, it will be taxed as a sole proprietorship.

* The LLC allows for the "special allocation" of profits--the disproportionate splitting of member profits and losses (in different percentages than their respective percentages of ownership). This means that members can enjoy the benefits of receiving profits (and writing off losses) in excess of their individual ownership percentage.

* The members enjoy limited liability, which means they are personally protected from any liability of the LLC and successful judgments, as well as from the LLC itself.

* Managing members' share of bottom-line profit is considered earned income because the managing member is considered to be an active owner--therefore qualifying the managing member for special "fringe benefit" treatment.

* The members' share of the bottom-line profit of an LLC is not considered earned income, and therefore is not subject to self-employment tax.

* Members are compensated using either distributions of profit or guaranteed payments. A distribution of profit allows each member to pay themselves by merely writing checks--whenever they need the money (provided the business has the available cash). Guaranteed payments represent earned income to the members, thereby qualifying them to enjoy the benefits of tax-favored fringe benefits.

* The managing member of an LLC can deduct 100 percent of the health insurance premiums he or she pays--up to the extent of their pro-rata share of the LLC's net profit, because the profit is considered earned income. Note: If a member has earned income, he or she will also qualify.

* A corporation can be a member of an LLC. This allows you to create an additional level of ownership, which is designed to create an entity that can offer such traditional fringe benefits as retirement plans and an additional level of protection from liability.

* As a member, you can contribute capital or other assets to the LLC, or loan the LLC money to put dollars or value into the business. You can take dollars out by taking a repayment of your loan (plus interest), a distribution of profit or a guaranteed payment. If any of the members die, the LLC can continue to exist--subject to the unanimous positive vote on the part of all remaining members.

Some of the disadvantages of an LLC are:

* Each member's pro-rata share of profits represents taxable income--whether or not a member's share of profits is distributed to him or her.

* The managing member's share of the bottom-line profit of the LLC is considered earned income, and therefore is subject to self-employment tax.

* The members' share of bottom-line profit is not considered earned income because the members are considered to be inactive owners; therefore, the members do not qualify for special tax-favored "fringe benefit" treatment.

* As a member of an LLC, you are not allowed to pay yourself wages.

* A few types of businesses generally cannot be LLCs, such as banks, insurance companies and nonprofit organizations.
Mark Herschberg
Sheriff

Joined: Dec 04, 2000
Posts: 6037
"Bang Hard",

Welcome to JavaRanch. That was a very helpful response you gave.

Please look carefully at official naming policy at Javaranch & reregister yourself with proper first & last name, with a space between them. Initials may only be used for a first name, but not a last name. Please adhere to official naming policy & help maintain the decorum of the forum. The naming policy can be found at http://www.javaranch.com/name.jsp

--Mark
Biprajit Das
Greenhorn

Joined: Jun 14, 2005
Posts: 3
Thanks I didn't know about the naming policy. Updated my name in the profile.

 
I agree. Here's the link: http://aspose.com/file-tools
 
subject: starting consulting corp, LLC ok?
 
Similar Threads
Req: Java; Perl, javascript, html, XML, New York, NY10121
Corp to corp
Consulting - LLC or S corp?
1099 consultant
How to set up an independent culsulting firm for myself ?