Where and how to incorporate a new management consulting firm with 4 equal partners

[stephop]

Three other professionals and I are starting a new management consulting practice. Although we have varying levels of experience and different strengths, weaknesses, and subject matter expertise that compliment each other, we will be four equal partners, each with 25% ownership. All of us have prior management consulting experience with major consulting firms.

I live in Georgia. Two others live in Ohio (a father and son team). And one of us lives in North Carolina.

We have three basic questions:

1. Which type of corporation should we start: S-corporation, LLC, or other type?

2. Which state should we incorporate in? Obviously we want to minimize our tax liability (both as a firm and as individual partners). Also, we want to make operating our business easy from a financial standpoint. But we live in three different states. Should we incorporate in Ohio, where two of our partners are? Should we incorporate in Georgia, where I live, since I'm likely to do much of the financial work? Or should we incorporate in another state for some other reason?

3. In which state should our attorney be located? I assume this would be the same state as our incorporation, but I want to make sure.

Thank you in advance for your insight.

 

[disagreeable]

This has stalemate written all over it. The father and son will always stick together and effectively neutralize all decisions they do not find favorable.

 

[stephop]

@disagreeable: Though I appreciate your right to post such a blunt opinion, your comment addresses a question I did not ask and does not answer any of my questions.

 

[army judge]

What is the difference between an S corporation and an LLC? Which structure is right for you?

The answers depend on your own unique tax situation. If operational ease and flexibility are important to you, an LLC can be a good choice. If, however, you're seeking to save on employment taxes and your peronal situations warrant it, an S corporation might work for you. Ultimately, you'd all be wise to sit with a tax attorney and/or a CPA before you decide on a specific entity.

Furthermore, if there are wide disparities in the incomes of each potential investor, consideration should be given to junior status for some participants. As to which states are favored by most investors, they are: Nevada, Delaware, Wyoming, Texas, Tennessee, and Florida. Again, that is a very personal choice, after you've consulted with a tax attorney. Finally, each of you should vet the decision with your own attorney; before throwing any money in the kitty!!!

I suggest each of you study the differences in S-Corp vs. LLC before you do anything. Why do I offer that suggestion? Well, neither of your aforementioned entities are corporations. They are simply business structures for federal tax purposes.

 

[disagreeable]

@disagreeable: Though I appreciate your right to post such a blunt opinion, your comment addresses a question I did not ask and does not answer any of my questions.

Thank you in advance for your insight.

First you ask for it, then you complain because you receive it.

 

[stephop]

What is the difference between an S corporation and an LLC? Which structure is right for you?

The answers depend on your own unique tax situation. If operational ease and flexibility are important to you, an LLC can be a good choice. If, however, you're seeking to save on employment taxes and your peronal situations warrant it, an S corporation might work for you. Ultimately, you'd all be wise to sit with a tax attorney and/or a CPA before you decide on a specific entity.

Furthermore, if there are wide disparities in the incomes of each potential investor, consideration should be given to junior status for some participants. As to which states are favored by most investors, they are: Nevada, Delaware, Wyoming, Texas, Tennessee, and Florida. Again, that is a very personal choice, after you've consulted with a tax attorney. Finally, each of you should vet the decision with your own attorney; before throwing any money in the kitty!!!

I suggest each of you study the differences in S-Corp vs. LLC before you do anything. Why do I offer that suggestion? Well, neither of your aforementioned entities are corporations. They are simply business structures for federal tax purposes.

@Army Judge - Thank you for your thoughtful answer to my questions. I appreciate it.