LLC, S-corp, Corporation?

May 15, 2012 4:26 PM

I run a electronic music blog and we are in the works of snagging some pretty big deals. A number of my partners mentioned forming an LLC. While our profit is low, we are potentially entering some big contracts in the future and need some credibility and protection. What is the most basic, simple form of corporation we can form?

Further, if all three of us owned the LLC, how would we claim business expenses on our taxes?

posted by ascetic to work & money (4 answers total)

An LLC is the simplest corporation you can form.

How LLC's are taxed

Normally business expenses would just reduce your profits which is taxed as normal income in most LLCs. Regardless get an accountant and an attorney when you set up the LLC to run you through all your options.
posted by bitdamaged at 4:33 PM on May 15, 2012

Nthing the "get and attorney" part. Things like LegalZoom just don't take into account the intricacies that something like you're doing might entail.
posted by chrisfromthelc at 4:59 PM on May 15, 2012

(IAAL, IANYL, TINLA.)

I suggest sitting down with an attorney/accountant BEFORE you set up the LLC. They may have reasons why you want to create a corporation as opposed to an LLC, for tax or other reasons.

I also suggest discussing with your business partners what you all want out of this business. Do you want to be able to sell it? Add partners? Are you all/any of you married? (May be relevant depending upon the jurisdiction). Go public? What if the company needs money in the future?

It may not matter for this meeting, but getting an idea of what everyone wants out of this venture may help the organizer figure out the proper way to set you up, and get everyone on the same page.

Good luck, and congratulations!
posted by China Grover at 5:14 PM on May 15, 2012

If there's money involved, absolutely yes on some sort of corporate structure (congrats on getting there, BTW). It provides legal protections, helps manage tax issues and codifies the relationship between the partners.

Definitely engage a lawyer, one who does corporate law, preferably one who knows at least something about entertainment industry law. That is...not the guy who you closed your house with, or did your probate...and never one that advertises on TV. Yes, LLCs are easy and all that, but you'd want to understand what is appropriate in the context of your business. For example, if RIAA decided tomorrow to put you on a list of "websites we want to make a messy example of", what would be the best corporate structure to protect your personal world? Given history, that's not a far-fetched use case.

And remember...contracts, including incorporation agreements, are not for when people are happy with one another. Get everything down, in writing, with your partners up front. Paper has memory, and nothing makes people more forgetful than when a little money turns into a lot of money.

Best of luck.
posted by kjs3 at 2:29 PM on May 16, 2012