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How much more work is needed for an S or C corp?

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So far, I have the gist of what makes a corporation different than an LLC, and the main difference between an S corp and a C corp. what I haven't yet grasped is how much more work it takes to run, and maintain a corporation, especially a C corp.

If I may ask, are there any members here that have experience starting and/or running a corporation (especially a C corp)? Thanks.

Shogun.

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C Corps and LLC depend on the state that you file in. C corps require a bit more tax filing because a C Corp is entity onto its own. Where an S corp or an LLC (under all of the versions) is more of a tax barrier that you can file all together.

 

Most states that I have operated in, C Corps and LLC have the same requires minus the different tax filings and requirement for annual meeting minutes to be submitted with the annual report to the state.

 

Hope this helps.

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I live in the state of Washington (and there's already a handful of IT companies here), and most tend to be in a city like Bellevue, Redmond or Kirkland.  

 

I understand how C corps are taxed as opposed to S corps and LLCs in general (C corps have a double taxation), but I read that aside from a C corp being the most expensive to start and maintain, there is a heavy record keeping burden.  One of the up sides is that it's easier to raise capital, and as a gamedev company, you're more likely to be taken seriously.  I'm not trying to be condescending here, but I'm not aiming to have your run-of-the-mill indie company that has to rely on kickstarter for funding either (although it's not a bad idea, that's not the route I want to depend on).  Ideally, my company will be somewhere between PopCap and Sega, but not a massively large AAA studio like EA or Activision who sells their souls for money.

 

While I see lots of recommendations for start-ups to begin as LLCs, would you ever recommend starting as a C corp for a start-up company with proper resources and planning?  Sorry, I should have mentioned this before.

 

Shogun.

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Ideally, my company will be somewhere between PopCap and Sega, but not a massively large AAA studio like EA or Activision who sells their souls for money.

 

Didn't PopCap sell their souls to EA for money? [linktongue.png

 

Bad example, yeah. :(

 

I was googling it, and forgot to change that.  I should have said maybe Gameloft.

 

Shogun.

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Double Taxation is only a thing if you do not have a creative cpa. S corps require you to pay yourself a comparable salary to the location and job type therefore, you are looking at self employment tax where a C Corp can provide employee benefits tax free. 

 

I would say if you compare the costs of operation between LLC and C corp C corp offers more. I have launched C corps before in place of LLCs (Hawaii) because of the capital raising factors are more flexible and it is easier to grow rapidly.

 

Again, hope it helps.

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Hello fellow washingtonian!

 

This is definitely a question worth spending a few hundred talking to your attorney about.  Most small companies these days are LLC's, which were created to provide the protection of the 'corporate shield' without (as much of) the paperwork hassle and taxation issues.

 

The big thing about C Corps (aside from taxation) over S corps is that you can have different types of shareholders, which can be useful if you're looking to get VC funded, bought out, etc.  That said, I'm not aware of anyone who started under S (or even LLC) who got bought out where that wasn't an issue the lawyers couldn't deal with-- that's what they do...

 

If you're serious enough about this (and it sounds like you are), then definitely find a good corp attorney and get their advice.  

 

Disclaimer on my immediate experience on this: I've done S-Corp and LLC, but never C Corp.

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Great advice!  Time to look up a lawyer in Washington, ideally one that has experience in IP and IT corporations (game industry experience is a plus).  I can afford a few hundred dollars on lawyer advice, fortunately.

 

Double Taxation is only a thing if you do not have a creative cpa. S corps require you to pay yourself a comparable salary to the location and job type therefore, you are looking at self employment tax where a C Corp can provide employee benefits tax free. 

 

I would say if you compare the costs of operation between LLC and C corp C corp offers more. I have launched C corps before in place of LLCs (Hawaii) because of the capital raising factors are more flexible and it is easier to grow rapidly.

 

Again, hope it helps.

 

 

Very interesting.  So, a really clever CPA can help me avoid some of the taxation issues?  I'll have to be on my guard for that.

 

Right now, the important thing to know is how C corps work in Washington state.

 

Shogun.

Edited by blueshogun96

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Don't forget to look at the annual file fee for each. I know in North Carolina there is a $200 annual report fee for an LLC where a C corp is just $35. I know that is not a huge amount, but the devil is in the details.

 

CPA's are why GE didn't pay a dollar in taxes. :)

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