LLC - Disregarded Entity vs. Corp. or S-Corp.
Hey BP Community,
I've got a pretty straight-forward tax question (BUT...all my internet research has not been able to give me a clear-cut answer). I have an LLC and was about to apply for an EIN on the IRS website but they ask "how many employees are involved in this company?" What are the tax advantages of filing as a "Disregarded Entity" vs. a Corporation?
I know this is a pretty basic question but I am just getting started in Real Estate and don't want to get hit with a HUGE tax bill at the end of the year. I am also in the somewhat unique position in that I have two family members who can help me with this business (although I am going to be doing the bulk of the work). When I enter "1" on the IRS application it says "for tax purposes your business will be considered a 'Disregarded Entity'" (with the explanation of what that means). When I enter "2" it tells me that my business will be considered a "Partnership" and when I enter "3" it tells me that it will be considered a corporation.
I completely understand that by listing my LLC as a corporation, I am adding additional forms and accounting headaches to the mix, but is there a distinct TAX ADVANTAGE for doing this? If I go the "Disregarded Entity" route, can I easily switch to a "corporation" at a later date (when the business grows)? Finally, someone recommended an S-Corp to me but this sounds even more complicated (from a Tax standpoint) - has anyone got experience with this & WHY would I want to go that route?
Thanx.