| Disclaimer: I'm not a lawyer or accountant, and you really should consult one of them about your specific scenario. Short answer: it's complicated, but probably C Corp. For the reason that if there's any chance you're going to take angel investment or give stock to employees, you almost need a C Corp. In fact, the lack of a standard C Corp just creates complications with investors and employees that puts you at risk. Keep it simple. * C Corporations are almost necessary if you are planning on taking investment. They are not as tax-efficient as LLCs because they're taxed twice (once at the corporate level, and another time at the personal income level / capital gains level depending on whether $ is paid out via salary or dividend.) However, they come with the benefit of having different classes of stock (usually required for investors / employee stock options). LLCs are pass-through entities. They reduce taxes for shareholders by basically eliminating payroll / capital gains taxes. If you have an LLC and want to take investment, it is relatively straightforward to convert to a C Corp if its early enough in the company's lifespan. On the other hand, converting from a C Corp to an LLC is a pain (you have to create a separate LLC and have it buy the assets of the C Corp, which creates a taxable event). An s-election is a good option to reduce tax-liability of a corporation. It grants pass-through status. However, to be eligible, you have to file in the first 75 days of the year, you can only have common stock, and all shareholders have to be US Citizens (no LLCs, etc). |
My intent is to get our saas product out and start charging through our website. So, I was thinking that forming an LLC is the cheapest way to get there. Spending several thousand dollars to form a C-corp seems too much at this point. http://www.quora.com/How-much-does-it-cost-to-set-up-a-C-cor...