spandit wrote:I recently moved from California, where my wife and I ran an S-corp, to Pennsylvania, where some of our colleagues are telling us to start an LLC. It looks like we could do either here in PA. So, does anyone have any advice about the pros and cons of both?
What does your attorney say? Is there a reason you can't or shouldn't continue to operate as an S-corp?
spandit wrote:In Cali, we set up a payroll system and we were the employees. It seems that is not necessary with an LLC. However, I am not exactly sure how to pay ourselves. And, I would assume we make quarterly tax payments if we aren't running a payroll, correct?
Will both of you be members of the LLC? If so, a multi-member LLC is taxed as a partnership by default, so you wouldn't be on the payroll unless you elect to be taxed as an S-Corp.
spandit wrote:I think I know the answer to this one: Will I still need an accountant if we set up an LLC?
Yes, I would highly recommend working with a tax professional. I would also recommend meeting with an attorney that specailizes in this area to make sure things are setup properly. There are many things to consider when forming an entity (liability protection, tax treatment, ownership, etc.).
tfb wrote:Not an expert but I heard LLC is simpler but S-Corp has the advantage of potential savings on payroll taxes.
The same can also be achieved with LLC taxed as S-corp.
tfb wrote:IRS says a husband and wife "qualified joint venture" can choose not to be taxed as a partnership and therefore avoid that complexity.
That's not what IRS says if husband and wife are operating as an LLC (unless in a community property state), although I'm not sure how they are justifying their position.
A qualified joint venture is a joint venture that conducts a trade or business where (1) the only members of the joint venture are a husband and wife who file a joint return, (2) both spouses materially participate in the trade or business, and (3) both spouses elect not to be treated as a partnership. A qualified joint venture, for purposes of this provision, includes only businesses that are owned and operated by spouses as co-owners, and not in the name of a state law entity (including a limited partnership or limited liability company).
A business owned and operated by the spouses through a limited liability company does not qualify for the election
Only businesses that are owned and operated by spouses as co-owners (and not in the name of a state law entity) qualify for the election. See Rev. Proc. 2002-69, 2002-2 C.B. 831, for special rules applicable to husband and wife state law entities in community property states.