LLC or SCorp
You can form a S-Corporation or a Limited Partnership, but if you are considering that, make sure you are talking to a lawyer who is familiar with the specifics of your specific situation and is advising you personally.
With both LLCs and S-Corps, you are taxed only once on the income of the entity, meaning that all of the income and expenses will be reported on an information return filed with the IRS, but the actual taxes are paid by the shareholders or members of the entity. This is called pass-through taxation.
Your corporate entity must be established correctly from the beginning with governing documents and then maintained on a yearly basis. If you don't do that, you may come to find out too late that your business entity doesn't provide the protection you thought it did. So, make sure that once you decide what kind of an entity to use, you set it up right and then maintain that entity. In other words, protect yourself from inside assets.
Except inside assets, there are also outside assets protection that protects your business from your potential personal liabilities. For example, if you are in a car accident, file for personal bankruptcy, or are sued by a business partner or colleague or personally guarantee a debt. These are all personal risks that are happening outside your business entity.
In most cases, your business entity is not protected from your personal risks. That means if you are sued personally and a judgment is obtained against you, the judgment creditor could take your business entity from you in satisfaction of the judgment. But, not always.
There are pros and cons to both LLCs and S-Corps and this is really a decision you should be reaching with the guidance of your own lawyer and your own CPA working together to advise you.
Your decision will have tax consequences that cannot be considered based on what you read in a general article that does not take into account the specifics of your situation. So before you incorporate any sort of entity, make sure to consult with your own personal lawyer and your CPA to make the decision about an LLC or an S-Corporation for your business structure.
LLC or SCorp
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