My son David has been researching a new idea that he presented this past weekend to a gentleman who has made tens of millions of dollars developing Internet companies and then selling them. This is one David did all on his own. And, at the first meeting, he convinced the gentleman to partner with David on this new project.
So, now my son is asking me the questions that a lot of people ask when they start a business and need a business structure fast. What is the best business structure? What state should we incorporate in?
These days my normal answer would be to form an LLC (limited liability company) and elect S Corp status. That’s because most businesses will start off with a business loss and you want to be able to take advantage of that loss on your personal return.
On the other hand, David’s new venture is shooting for a big bang. And, it might just make it. They want to start right off with a C Corporation because they are likely going to bring in investors and then sell within 1 – 2 years. In fact, the company is being built to sell. David’s mentor is currently writing a book about one of his three successes, “Zero to $50 Million in 9 Months” and it’s all true. So, I’ve had a few of my paradigms about business shattered.
So, in this case, we’re using a Nevada C Corporation and making sure we have a way to prove nexus within the state of Nevada.
Another attendee has a brilliant method for creating no-work, completely passive affiliate marketing websites that automatically kick off $10K – $15K per month. He’s looking for a way to do this through his pension plans so that he pays no tax now. We’ll use a specially designed LLC that allows you to use your pension plan to invest in business or real estate.
What’s the right business structure for your new business? The answer really is “It depends.”