Tell me if you have heard this one before.
If this is not your hobby, then stop being a Sole Proprietor.
In 2003, Massachusetts Limited Liability Act was changed to allow single-member LLCs. I remember when it happened and I said it then in an article and I will say it now 16 years later: “Gone are the days of the unprotected Sole Proprietor for serious businesses.” If you are serious about your business, make your business serious.
I have heard a bunch of armchair lawyers say random things about LLCs and Corporations.
So I realize this is an age-old question, but I am going to frame it differently: “Does being a corporation for a solo-owner who doesn’t intend to have investors 1. protect me better than an LLC; and/or 2. offer me better tax advantages than an LLC?”
- No. Corporations and LLCs shield personal assets to the exact same degree. Do not listen to people who tell you otherwise.
Corporation: There is no flexibility in management and tax reporting; requires payroll
LLC: Highly flexible management structure, tax reporting options and doesn’t require payroll.
- In some cases, definitely. BUT if you are becoming a corporation SOLELY for the tax benefits (as opposed to the fact that your structure calls for it, you are seeking investors, you have a board, you want shares and shareholders), then become an LLC instead and elect to be taxed as an S-corporation. Remember, however, you must put yourself on payroll.