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I used to work on wall street for over 6 years in the stock market. I am not a CPA but from my personal knowledge from my experience from taking the series 7 test and 64 to become a licensed Stock broker. I had to learn the tax ramafacations and tax shelters for all types of stocks, bonds, corporations, DPP's, Realestate.... ETC
In my personal opinion one of the best ways to set up a company would be to set up a DPP(Direct Participation Program) or a LLP(Limited Liability Partneship). The LPP differs from a LLC(Limited Liabilty Corporation) in many ways. LP's are usually formed as a tax shelter. I am not going to get into the differences between the LLP & LLC. First I will say the cost to set up a LLP is usually more costly than fee's to set up a Corporation. The reasons being the LLP is a much more benefial way to set up a company. However the LLP may not be suitable or appropriate for everyone looking to form a company.
The corporate tax bracket if I am not mistaken is 36% maybe even higher. If you elect to be classified as a small business corporation(S election) you do get tax benefit as well as avoid getting double taxed!
The LLP does not fall into the corporate tax bracket due to the fact it is not a corporation, it is a participation program. The thing that makes the LLP beneficial to form over any Corp is that first and fore most the partnership has no set tax bracket. It benefits from the flow thru tax treatment. Which means any and all income after operational costs will be taxed at the partners OI(Ordinary Income) tax bracket. So your tax bracket would be your Ordinary Income bracket, that is one of the biggest benefits. The other benefit in my eyes is that the way the partnership is formed you have GP's(General Partners) and you can have unlimited SP'S(Sponsoring Partners). The role of the GP or GP's is to over see the daily duties & operations as well as make all business decisions for the LLP. The GP's do get a salary and a GP can also be a SP. The SP's are merely investors in the program they have no say in the future of the company or how the company is run. They get a percent of the profits after the deductions of operational and salary costs. The total liability for the SP's is the amount of the original invesment to become a SP and a partner in the program.
I can go on and write a book as to why I think the LP or DP is the best way to go. So I will leave off saying this. If you are looking to form a company do your due diligence. Definatley look into forming a DP or LP it might be worth your time.
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h34r:
