3 Person Service Business, Question about how to structure financially?

by galixifyy. Posted on Sep 10, 2020    0    7


Hi, I'm looking to start a service business with my two friends, we are wondering what the best way is to structure the business payments? Would it be best to start an LLC and just list all 3 of us as employees?


Comments

dmolot13 1

It is honestly between an LLC and S Corp. Both of them are valid choices but with an S Corp, you can actually be paid a "reasonable" salary whereas in an LLC you cannot. You should check out this link which is an article about LLCs vs S Corps and which one may be right for you as well as their advantages.

  galixifyy 1

Regarding the "reasonable" salary, I'm not sure I'm following. Does one restrict the salary employees can be paid ?

dmolot13 1

In a LLC, you take money out of the profits (based on equity) and are not able to actually have a salary. In an S Corp, you are allowed to pay yourself a salary and still take money that the company earned based on your equity split.

Visual-Condition-881 2

As a business owner I wouldn't suggest having 3 active owners as that could create difficulties in the future. If you are in the service industry an LLC is the best way to go.

  galixifyy 1

Thank you very much for the responses!

Visual-Condition-881 2

Are you all equal owners? Can you run the business w/o 1 of the partners?

  galixifyy 1

We can be equal if it needs to be, and it is all 3 of us as of right now, there are not intentions right now to only have 2 of us participate.