In the past, we discussed the tax effect of selecting S company by LLC. Today, I compare the registration fee between S Corporation and LLC. Business registration begins at the state level. Since I live in California, I can only tell you what I learned about registering in California. Fortunately, registration at the federal level is quick, painless and free. I will explain this in detail later.
S Corporation
S Corporation is very similar to C Corporation at the time of registration. At company registration, we start by submitting to the Secretary of State a document called "Constitution" (also known as "Establishment Certificate" in other provinces). The constitution is a legal huge jumbo that describes the name, purpose, service agent, initial director and liability limit referring to your corporation. There is no form. This is a bulleted list you have to prepare and sign and will be reviewed and approved by the Secretary of State. However, there is a minimal concrete wording that needs to be included for each word.
A special fee of 100 dollars and 15 dollars will be charged in the articles of incorporation. If your articles of incorporation are rejected, a $ 100 check will be returned with instructions on what you need to change, but the $ 15 fee will be lost. When you resubmit it you have to pay another $ 15.
Within 90 days after your articles of incorporation are approved, you need to submit an information statement (Form SI - 200 C) that provides biographical information on your company, officers and work place. This will cost another $ 25. After that, we have to submit an information statement every year for $ 25.
Limited Liability Company (LLC)
Registration of LLC is somewhat easier as there is actually a form (LLC - 1) you fill in. It removes a lot of guesswork. LLC - 1, well known as the organization 's articles of incorporation, costs $ 70. There is a similar $ 15 special fee. Also, within 90 days after your articles of incorporation are approved, you need to submit a Statement of Information (Form LLC - 12) and pay $ 20. After that, information needs to be submitted every two years at $ 20 / year.
Common cost
In addition to the costs above the different costs of LLC and S Corp, there is a common cost essential to both owned structures. Keep in mind that I maintain the tab for registration and maintenance costs here, except for other start-up costs. We already explained taxes in the last article.
Registration agent
Both LLC and S Corp in California need to specify registration broker. A service agency can be a company or an individual, but your company can not become its own agency. Some people list one of the owners as agents of the service and enumerate those who submit lawyers or union documents. What you need to recognize is that you need to be available at all times during normal business hours. In other words, if you mention yourself as an agent, you can not take a vacation and you can not go to a coffee break or take a piss. It is undoubtedly possible that someone was trying to send a process service (notification of litigation) while you were reading the toilet Playboy magazine. If you miss a document, it may lead to default sentences. In this case I decided to bit that bullet and went to one of the three biggest service provider registration agents (National Registered Agents, Inc. (NRAI)). The cost of NRAI is $ 120 / year. The other two companies are the Company Trust Company (CT) and the Corporate Service Company (CSC). Both are add-ons of $ 250 / year. Reputation is important here. Most companies offering online filing kits also offer registration agency services for 6 months or 1 year. I do not know how reliable their registration agents are. They usually charge $ 100 / year. The Fortune 500 and the legitimate community do not talk to anyone other than Big Three with regard to registration agencies. Draw your own conclusions.
Name reservation
When registering an LLC or a corporation, there is a possibility of using a fictitious name. That is, the name you made, or your imaginary friend's name in the third grade. Names like "Baba The Bird" may already be used in other businesses in your state. In this case, you need to choose another one. On the California Secretary of State website you can check if your name is available. If your name is available you can pay $ 10 to book your name for 60 days while preparing your Constitution. However, please register under the same applicant that I reserved the name so that I do not encounter what is called self-enforcement deadlock (I retain the name you reserved,
Federal registration (employer ID application)
At the federal level, you need to request a Federal Employer ID Number (FEIN). This is equivalent to SSN, which identifies your company at the federal level. In the Stone Age, companies acquired FEIN using Form SS - 4. Today, you can get FEIN online quickly. There is no charge related to this submission.
Federal tax election
At the federal level, if you want to go with S Corporation, you need to complete Form 2553 and do the election. Multi-member LLC will be taxed as a tax partnership unless you fill out Form 8832 There is no fee associated with this submission treated as a corporation. However, you must do the election within 2 months and 15 days (or whichever is later, whichever you joined) from the beginning of the tax year that the election wishes to take effect. Timing is important here. If the deadline is not in time, your company will be treated as a C corporation until the S election next year.
State Employer ID Request
Federal Employer Number (FEIN) is required to obtain National Employer Number (SEIN). You can get free SEIN via Form DE-1 or online immediately.
Business license
Some professionals, such as contractors, require a license to operate in California and other states. Fortunately, business in which I am engaged does not require a business license. So I do not know how much it costs the business license.
City registration
In most cities, you need to register your business. In order to maintain business registration to the city, you need to pay annual fee. Please check with the staff of the city about the form and fee that you need to pay.
Overview
Below is a table summarizing the different costs of LLC and S counties discussed, with the exception of general costs.
LLC and S Corp cost comparison
Item LLC S Corporation
Organization / Establishment Guide $ 70 $ 100
Processing fee 15 15
Statement information 20 initials, 25 initials,
Twice a year, 25 times a year
after that
Total First 5 years 145 240
So there are some savings by registering LLC compared to S Corporation. But savings will not accomplish or break your business. A saving of nearly $ 100 for five years with LLC does not exceed the tax incentives provided by S Corporation or tax stability in my opinion.
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