If you sell expertise—consulting, creative, tech, legal ops—the right structure should make your life simpler, not more bureaucratic. Here’s how we guide New York service firms.
The Short Version
- LLC (default tax): Clean, flexible, low-friction. Great for early days and solo/partnership shops.
- LLC taxed as S-Corp: Worth exploring once consistent profits appear. You’ll run payroll for owners and treat the rest differently—potential tax benefits if done right.
- C-Corp: Useful when you’re chasing venture money, stock options, or international holding structures. Comes with formalities.
How We Actually Decide
We model three scenarios for the next 12 months:
- Owner compensation. What’s a reasonable salary for the role you actually perform?
- Profit after salary. Is there a meaningful remainder?
- Compliance overhead. Payroll + filings + bookkeeping—does the admin cost outweigh savings?
If the math says “marginal,” we stay LLC for now and revisit in six months.
A Note on “S-Corp Saves Taxes” Myths
It can—if you pay yourself a reasonable salary, run payroll correctly, and keep clean books. Otherwise, you’re just adding complexity.
When C-Corp Makes Sense in NJ
- You’re courting institutional investors.
- Equity compensation is central to your hiring plan.
- You plan to reinvest profits and aren’t optimizing for pass-through treatment.
Avoid These Structure Mistakes
- Electing S-Corp on day one “just because.”
- Paying owners nothing (or everything) through payroll.
- Treating distributions like petty cash. Document everything.
FAQs
Can I switch later? Yes. Many clients start as LLCs and elect S-Corp after the business stabilizes.
What about multi-member LLCs? Draft the Operating Agreement carefully (ownership, decision rights, exits).
Will investors hate LLCs? For traditional VC, yes. For most service firms, it’s a non-issue.
CTA: Want a 30-minute structure sanity check? We’ll run the scenarios and give you a straight recommendation—no jargon.