Tax Practice / Entity form?

[bbrownatl]

Just wanted to get some feedback on the differences between a P.C and professional LLC . I’m not a full time tax practioner. Rather, I’m a CPA with a Corporate America job that has maintained a side tax practice for several years now, mostly individuals and some small businesses. Just ran it through Sch. C. However, in the interest of proceeding forward now that the side client base has expanded quite a bit and for certain liability purposes, I started to consider the various entity options. S corp election and SE tax considerations are not a huge issue now as my current side income is relatively modest. In GA, a professional can form as either a P.C. or LLC. I see various professionals as "John Doe CPA, PC" but also "John Doe CPA, LLC" In this regard, I would appreciate any insight as to what you deem as the most important pros/cons (fringe benefits, etc.) and also your recommendations.

By the way, TTB has been a great resource as well as this message board. Thanks as always for your assistance.

Brian

[BOB W]

Just wanted to get some feedback on the differences between a P.C and professional LLC . I’m not a full time tax practioner. Rather, I’m a CPA with a Corporate America job that has maintained a side tax practice for several years now, mostly individuals and some small businesses. Just ran it through Sch. C. However, in the interest of proceeding forward now that the side client base has expanded quite a bit and for certain liability purposes, I started to consider the various entity options. S corp election and SE tax considerations are not a huge issue now as my current side income is relatively modest. In GA, a professional can form as either a P.C. or LLC. I see various professionals as "John Doe CPA, PC" but also "John Doe CPA, LLC" In this regard, I would appreciate any insight as to what you deem as the most important pros/cons (fringe benefits, etc.) and also your recommendations.

By the way, TTB has been a great resource as well as this message board. Thanks as always for your assistance.

Brian

PC stands for Professional Corporation
LLC stands fo Limited Liability Company

[bbrownatl]

Preferences

Bob, thanks, I'm aware of the definitions. Rather, I was just looking for insight into preferences one way or the other with regard to the setup of the entity. Any further guidance appreciated.

Thanks,
Brian

[ChEAr$]

Whether using an LLC or corporate form, I favor the S corp choice, mainly because
1 regular C corp might come up against PSC rules;
2. I don't need medical insurance deduction provided under a C corp (since wif'e policy
is Blue Cross!)
3. A reasonable salary with an S corp (in business for a long time with considerable goodwill
attendant) lowers FICA costs.

Either LLC or corporation can be done without an attorney, saving much money.

[Koss]

Entity Selection

Just a quick observation...

If you form a single-member LLC, it will give you some degree of limited liability, and help you shield most of your personal assets, because that's what an LLC is meant to do. When it comes to taxation, however, you can still choose how the LLC is taxed: either as a sole prop, a C corp, or an S corp. (Partnership is not an option for a single-member LLC.)

If you form a professional corporation, you may or may not have the same flexibility. And a professional corporation may or may not give you the same degree of limited liability.

This sort of thing varies quite a bit from state to state, and I am utterly unfamiliar with Georgia law on LLCs and PCs. (And even if I thought I understood it, I couldn't give you professional advice, 'cause I'm not an attorney.)

The best recommendation I can make is that if you think you might take on a partner at some point, or sell your practice, you should avoid choosing the sole prop status. For a single-member LLC, the S corp is probably your best bet, in the sense that it makes it a lot easier to transfer ownership of part or all of the company...

I can't speculate on whether there is a tax advantage to the PC structure, or some other, non-tax advantage, because, as noted earlier, I'm not familiar with the PC structure in Georgia.

At the risk of stating the obvious, you may want to talk to an attorney.

BMK