Congrats on your adventure, it’ll be fun, and stressful, and rewarding!
Like others have written, an LLC is a good bet but you have other options as well. We incorporated Generator as an S Corp for a few particular reasons - the structure is that of a large Corporation without the large accounting bills and upkeep, the payroll tax structure is excellent (see excerpt below for an example), the liability shelter is excellent (see second excerpt below) and the ability to easily move from Corporation assets to personal assets (or vice versa) worked for us since we’re a family business.
More than anything, I recommend consulting with a business accountant.
Secondly, we’re in need of a packaging engineer for a small project, the two I use are otherwise busy - shoot me an email if you have room on your plate!!
…S corporations, or Subchapter S corporations, produce several tax benefits as compared to sole proprietorships, partnerships, and C corporations. The big benefit–and the one that people usually talk about–is the payroll tax savings. To understand how this works, let’s compare two alternatives: A sole proprietor making $90,000 a year and an S corporation making $90,000 a year. Of course, the taxes that a sole proprietor pays depend on his or her filing status, itemized deductions and family size, but typically such a person might pay about $12,000 in federal income taxes. The person might also pay another chunk in state income taxes. In addition to these income taxes, the proprietor also pays a 15.3% self-employment tax on the $90,000 of business profits. Roughly, this self-employment tax (which is equivalent to Social Security and Medicare tax) equals $13,000. Things usually work differently when a business has made the Subchapter S election, however. To make calculations easy, assume it is owned by a single shareholder. The corporation must break the $90,000 of profit into two buckets: wages and the leftover (which is called a distributive share). If the wages equal $40,000 and the leftover distributive share equals $50,000, the business pays Social Security and Medicare taxes (equivalent to self-employment tax) equal to roughly $6,000. In this case, even though the two businesses make the exact same amount of money, the sole proprietor pays roughly $7,000 more in tax each year. In addition to the big benefit of self-employment tax reduction, S corporations also provide two other useful benefits–benefits which are a little more difficult to quantify but still important nonetheless. One such benefit is that an S corporation can use losses (such as those that often occur in the early startup years) as tax deductions on the shareholders personal income tax returns. Additionally, the S corporation is not taxed on its profits–at least by the federal government…
…An S corporation operates much as a partnership or limited liability company in that income and expenses are “passed through” to individual owners’ tax returns, avoiding the double tax of C corporations. Yet an S corporation protects personal assets from debts and claim against the company, a protection shared by all corporations and LLCs. Only shareholders’ actual investments are at risk…