I recommend forming a C-Corporation with an S-Election filling most of the time. If you have a lot of assets in your business, then sometimes a C-Corp is best. And if your business has many owners with gross revenue in the millions, a C-Corp can have some tax advantages. If you are new to the industry and just starting out with little assets, then an LLC will give you some tax advantages and provide you with protection in case of a lawsuit or accident. However, a Corporation will provide you with the maximum amount of protection when it comes to your personal assets in the eyes of the IRS if done correctly.
You need to be aware that there can be a double taxation when it comes to a C-Corp. That is why an S-Election or S-Corp is usually the way to go if you are a single owner and grossing under about $2 million annually.
There are many tax advantages to an S-Corp over an LLC as well. Health Savings Accounts, Corporate Officer Car Allowance, health insurance benefits and some retirement accounts under a Corporate entity can save you tons in taxes. But you also need to take into consideration what your goals are and where your business is currently at.
The disadvantage to a Corporation is more complexity and paperwork to setup and maintain annually. I would advise having a good attorney who knows tax law and a good accountant to prepare your tax return each year.
The restoration industry can be a litigious business. You are dealing with stressed out people who have been in a bad situation most of the time. Throw in an insurance company or adjuster that upsets them about the money part of things and it can be a recipe for an attorney to make some money. That being said, don’t be fearful that you are going to get sued every time you turn around. I know cleaners that have been in this industry for 20 years and have never been involved in any legal action. But I believe in being safe and setting yourself up for success and to avoid any possible problems down the road.
The biggest reason to look at an S-Corp is tax advantages. So find yourself a good accountant and talk with them first about your circumstances before setting up your business structure so they can make sure you are on the right track.
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