There are a lot of quick and easy ways to start an LLC that most people know out there, from having a professional business lawyer doing it for you to doing it on your own with a place like IncFile or LegalZoom. But what about the rest?

If you have an LLC, Partnership, or just a Proprietorship and intend to transition it to a Type S or Type C corporation later on...what do you feel is the best way to go about it?

Do you believe that the online companies which offer this are sufficient to keep you protected and offer a complete solution, or do you go to a lawyer, paralegal, or another professional to get it changed over just to make sure everything is legitimately taken care of?
Why other with business types other than LLCs? LLCs provide you everything you need for a small business, including the fact that you're not personally on the hook for whatever debts the company could generate and be unable to pay back.


There are a few reasons and differences, Schmetterling.

Type S allows business owners to use business losses more flexibly than an LLC, like any loses incurred during the startup phase, or personal tax returns as deductions. A type S can give you extended savings on self-employment, ss or medicare tax over an LLC, and lets owners offset unrelated money to their business and associate it with losses from the business (neither LLC nor traditional Type C let you do this).

As for LLC and type C, there aren't restrictions on how many owners the business can have or who the owner is, so on that either one of those two are more flexible than Type S. Type S doesn't let you have more than 100 owners, and they have to be legal citizens (never non-resident aliens) unlike a type C or LLC where that is ok.

Type C lets you hold different types of stock interests (common stock, preferred stock, etc) which venture capitalists like and usually choose to fund over LLCs and Type S because of the dividend benefits of a higher return, and type C can accumulate and retain their earnings from year to year with few if any restrictions on it.

So if you have a Type S, you can use writeoffs more flexibly than an LLC in some cases, and get special types of tax breaks on your business. Type C lets you do more with the stock market and investors than the other two, while LLC gives you more protection than being a proprietorship, but there are still some cases where you'd want to have a partnership or proprietorship than jump into an LLC or beyond.

I was trying to see if people who have incorporated as an LLC decided to become a Type S or Type C due to advantages in certain areas while holding on to what they had as an LLC still, or if they changed from a Type S or Type C to an LLC and restructured their employee pool and assets to overcome the changes and restrictions between them. That, and any perks or hidden benefits of having one over the other that are not commonly known, but would be helpful to both people getting started and those in business for a while but looking at the advantages and disadvantages of switching from one to the other. :)


Incorporate in Delaware. Its not only cost effective, its also better because the laws in Delaware are pro-business. Finally, there is no jury system, so litigators can't emotionally sway people to influence jury members.

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