Hi
We 5 friends are planning to start a business. We would be equal partners. We are planning to do multiple business under a new company. What type of company should we open? S-Corp? LLC or C-Corp?

I guess hard to tell which option is the best; however it depends; if you’re running multiple business projects, you’ve probably wondered what’s the best way to structure all these ventures.You need to answer these questions from a marketing , taxation, or legal perspective. from a legal perspective, there are three ways to legally structure multiple businesses. Each option has a different set of advantages and disadvantages – and the “right” approach depends on your unique needs. to create a separate corporation or LLC for Each Venture. You can form an MMLLC or corporation for each business venture. For example, you can form an LLC for a bookkeeping business and then form another LLC for selling homemade soaps.While this seems straightforward enough, be aware that this approach will result in considerable paperwork. You’ll need to file separate forms (i.e. annual reports, meeting minutes) to the state for each structure. And if you’ve formed corporations, you’ll need to file separate tax forms for each corporation. If you’re looking to minimize your administrative requirements, you need to consider another option.

There’s one exception to this rule and that’s for real estate investors. Assume that you’re investing in rental properties or other real estate, you may want to consider forming an LLC for each property in order to protect each investment on its own. Then if property “A” is sued, only the assets belonging to LLC “A” are affected. Your own personal assets are shielded, as well as the assets belonging to Property B, Property C, etc.This is the best way to contain liability in potentially risky ventures.
If you create One Corporation/LLC and Have Multiple DBAs Under the Main Corp/LLC,Your second option is to create one main company as an LLC or corporation. Once that LLC or corporation has been established, it files multiple fictitious business names, also called DBA (doing business as) registrations, for each of the ventures within the same state/county.With this approach, each business can have the right name and branding for their specific market, while still enjoying the legal protection of the main holding company. When it’s time to file your taxes, you can take the income earned from each DBA and report them in a single tax filing under the main LLC or corporation.

Of course, situations vary and you should always consult with an attorney or tax pro for individual advice regarding your particular situation.

If you create One Corporation/LLC with Other Corporations or LLCs Under the Main Holding Company. In the third approach, a holding company will own individual Corporations/LLCs for your multiple businesses. This scenario often comes into play for companies that are looking to be acquired. It also applies for those cases where an established company is looking to start a new business (and the established or holding company will fund the new business).

The particular tax and legal implications can become complex for this scenario. Consult with a tax pror and/or attorney for the best way to structure your holding company and its subsidiaries.So you may consider this overview of how to structure multiple businesses as just a starting point.
note; The C corp is a taxable entity in and of itself;owners of a C corp will ultimately decide whether the entity will pay income tax or the ownership group will pay income tax as individuals. In the closely held business world, owners in the C corp are also the management team which is very different from most publicly held businesses. The C corp is an entity that can produce double taxation in the sense that it is possible to leave earnings in the entity, subjecting them to tax, and then later distributing them to the ownerhsip group, or shareholders, to be taxed again. Careful management of this issue can serve to avoid double taxation. In addition, there can be many advantages for first starting a business as a C corp entity, including code section 1202 stock. This code section allows for the exclusion of 50% of the proceeds from the sale of the company's stock. However, this exclusion is subject to the alternative income tax. An important characteristic of 1202 stock is that one can sell C corp stock and invest in another C corp's stock with the proceeds, and avoid paying income taxes currently on the transaction. The S corp, for income tax purposes, is typically a flow through entity. This means that earnings at the corporate level flow through sch k1s to the shareholders to be taxed at their individual income tax rates. In a subchapter S corp, these flow throughs are not subject to the employment taxes ,self employement taxes, which could save significant tax dollars. Fringe benefits can not be paid and deducted for more than 2% shareholders of the S corp and 1202 stock provisions will not apply. The S corp does work very nicely where the business is extremely profitable and there is fear that there will be unreasonable compensation charges if the company were operating as a C corp. There are instances when irs will claim that wages paid to the shareholders in a C corp consititute dividend payouts rather than deductible compensation. Dividends represent double taxation as they are taxed once at the C corp level and again at the shareholder level.The S corp eliminates this problem for the most part as the shareholders can set their compensation levels reasonably and allow the rest of the earnings to flow through. The S corp can also be good for the sale of a business. Depending on one's time horizon and structuring of the sale, the S corp can provide for capital gain treatment if the business' assets are sold rather than its stock as compared to 1202 stock treatment of the C corp.


The LLC is an interesting entity choice. It works wonders for multiple businesses and can provide for significant tax savings when fully understood. The LLC can be taxed as a C corp, an S corp, or a partnership. It is a versatile format for running one's business.all earnings of the LLC,s are not subject to SE tax, but the SE tax will be paid at the management corporation level. The LLC's will pay management fees to the governing corp where SE tax will be paid through W-2 compensation paid to the shareholder or shareholders. Whether the management company is a C corp or S corp depends on issues mentioned above. If I want fringe benefits, the C corporation is the proper choice. If wish to save even more money on SE tax, The S corp will be your entity of choice (beware of getting too greedy as IRS is cracking down on S corps with low salaries to owners). Because of this structure of LLC's and the management company, I am not concerned about unreasonable compensation issues as I can control the amount of management fees that get back to the management company. All other earnings will flow through to the partners' returns from the LLC's and will not be subject to the SE tax. If the LLC is a partnership, normal partnership tax rules will apply to the LLC and it should file a Form 1065;Each owner should show their pro-rata share of partnership income, credits and deductions on Sch K-1 (1065). Generally, members of LLCs filing Partnership Returns pay self-employment tax on their share of partnership earnings.