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Limited Liability Company and Corporate Law

Hi All, My friend is looking to launch a business this ye canon8302/04/19
These vary by state lolwutjobs02/05/19
He should prolly start with a nutshell, do jurisdiction spec triplesix02/05/19
If it's just a single-member LLC he can probably get by with onehell02/05/19
As someone who deals with this from time to time, if a clien dingbat02/05/19
My experience of an LLC seems to be best for super specific irishlaw02/05/19
there are many reasons why an LLC could be useful. But yeah dingbat02/05/19
In your opinion, when considering between an LLC and an S Co irishlaw02/05/19
Usually, an LLC is better than an S Corp. But if you know dingbat02/06/19
An LLC can simply elect to be taxed as an S corp at the poin onehell02/06/19
Although an S Corp shareholder gets a K1 like a partnership, wcdtax02/11/19
LLC is the best form. Corporate owners hold shares. Shares jeffm02/06/19
you just brought up a major point: LLC laws vary signific dingbat02/06/19
Lol pretty sure this was my point in the first post ITT. Non lolwutjobs02/06/19
sorry folks - Delaware is the jx in question. how do I le canon8302/18/19
What makes you think google has a complex company structure? dingbat02/20/19
To be more helpful, just google things like “s Corp vs LLC dingbat02/20/19
canon83 (Feb 4, 2019 - 9:38 pm)

Hi All,

My friend is looking to launch a business this year and has asked me whether he should create a subsidiary LLC (opco) and how it should be funded. I told him to f off and hire a lawyer because I don't know jack when it comes to that.

Can you recommend any books/resources that will provide an overview on various corporate holding/sub structures and their legal and financial/accounting considerations?

Thanks.

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lolwutjobs (Feb 5, 2019 - 12:06 pm)

These vary by state

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triplesix (Feb 5, 2019 - 12:35 pm)

He should prolly start with a nutshell, do jurisdiction specific research and seek counsel of a tax lolyer.

I am guessing buddy ain't trying to pay for all that haha

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onehell (Feb 5, 2019 - 1:00 pm)

If it's just a single-member LLC he can probably get by with some stock forms, some tax advice from CPA, and primer on avoiding the kind of commingling that can lead to veil-piercing.

But if it's a multi-member LLC, i.e. if the company will have multiple owners, that's where he needs an operating agreement and people really should get counsel for those.

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dingbat (Feb 5, 2019 - 1:55 pm)

As someone who deals with this from time to time, if a client were to walk in and say "I want an LLC" my first question is "why"?

Turns out, a lot of people have heard of this mythical thing called an LLC, and while they don't know what it is, they think every business should be one.

Under the right circumstances, an LLC is wonderful. Under the wrong circumstances, it's problematic. It's not just about taxes, but also about real world issues.
for example, if he's trying to raise capital through equity, it's not going to happen with an LLC. If he wants to eventually IPO the company, that's not possible with an LLC. And if he's looking to sell the company a few years down the line, the buyer probably won't want it to be an LLC. So if those are his goals, then it doesn't make sense to be an LLC.

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irishlaw (Feb 5, 2019 - 2:09 pm)

My experience of an LLC seems to be best for super specific ventures. Like owning and operating one Aircraft.

For a business, if you want the protection and liquidity of a Corporation and the taxes of a partnership...maybe an S Corp?

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dingbat (Feb 5, 2019 - 8:54 pm)

there are many reasons why an LLC could be useful. But yeah, the most obvious is for specific ventures - such as a separate LLC for each aircraft, or a separate LLC for each building.

It's also a great replacement for ye olde partnership, or for sole proprietorships, as it can pretty much replace the older version, but include some sort of liability protection.

S Corp has the taxes of a partnership, but not quite the liquidity of a corporation. Just like an LLC, it should be done for the right reasons. LLC vs S-Corp actually requires serious considerations.

A C-Corp is often the right choice even when people think it isn't. For example, if it's a small company, a C-Corp can avoid double-taxation by distributing any excess profit in the form of discretionary bonuses. (Even better, occasionally you can game the corporate tax rate versus the individuals' tax rates, and come out ahead). If the company needs to retain some of the profit for growth, then it could distribute the profits and sell more equity to the shareholders.
Or if some stupid f-ck wants to establish a B-Corp, clock them over the head, tell them to just make it a C-Corp and justify the "do good" stuff as branding or marketing strategy, which achieves the same objectives but avoids the slightly more onerous rules of a B-Corp

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irishlaw (Feb 5, 2019 - 11:00 pm)

In your opinion, when considering between an LLC and an S Corp, what would make you choose one over the other and vice versa?

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dingbat (Feb 6, 2019 - 9:08 am)

Usually, an LLC is better than an S Corp.

But if you know you’re goung to need to convert into a C Coro in the near future AND double-taxation is a real concern, it makes sense to start as an S Corp.

Converting an LLC into a C Corp can be a lengthy and expensive process. Converting an S Corp into a C Corp takes one form and is effective the next day

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onehell (Feb 6, 2019 - 12:48 pm)

An LLC can simply elect to be taxed as an S corp at the point that becomes advantageous, which is basically the point at which subjecting your "reasonable salary" to payroll taxes is worth being able to take the rest of your profits as a distribution.

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wcdtax (Feb 11, 2019 - 10:52 pm)

Although an S Corp shareholder gets a K1 like a partnership, it is not taxed like a partnership. S Corp net income is not subject to se tax while active partner net income typically is. Partnerships also have more flexibility with special allocations that S Corps do not. They are also taxed in a completely different sub chapter, s vs k.

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jeffm (Feb 6, 2019 - 9:17 am)

LLC is the best form. Corporate owners hold shares. Shares are subject to attachment and execution by creditors. Once the creditor attaches the shares, the creditor can sell them, vote them and even manage the company if he holds a controlling interest.

LLC owners hold membership interests. In Texas, creditors can attach only to the member's right to receive distributions. Creditors can't vote or manage the LLC, nor can they compel distributions.

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dingbat (Feb 6, 2019 - 11:20 am)

you just brought up a major point:

LLC laws vary significantly from State to State.

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lolwutjobs (Feb 6, 2019 - 8:09 pm)

Lol pretty sure this was my point in the first post ITT. None of this matters w/o knowing jx

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canon83 (Feb 18, 2019 - 6:09 pm)

sorry folks - Delaware is the jx in question.

how do I learn how to get up a complex company structure like alphabet/google?

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dingbat (Feb 20, 2019 - 10:43 pm)

What makes you think google has a complex company structure?

The right answer is through practice. The more you’re involved with structuring corporations, the better you get at it.

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dingbat (Feb 20, 2019 - 10:47 pm)

To be more helpful, just google things like “s Corp vs LLC”, “corporate structures”, “legal entities”, stuff like that, to learn the different business structures and their main advantages/disadvantages. Shouldn’t take more than a few hours to learn the basics.

You’ll find things you’ll want to learn more about, and you can delve deeper in those areas

Beyond that, ask questions from people who know.

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