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When starting a business that you don't expect will make much money, are you better off forming an LLC or an S corp?

Asked by farmer (354points) December 4th, 2016

For example, (and this is not actually what I’m doing, but I am doing something similar,) let’s say I am hand making my own teapots and selling them online . For now it is just me, but I know someone who makes her own ceramic bowls and vases, and we would like to work out a plan whereby I would sell some of her products along with my own. And perhaps in the future I will want to contract with other craftspersons.

I want to incorporate for basic liability protection. What if someone I am selling for tells me they are using food-safe glaze and I sell an item as being suitable for food, but it turns out my supplier lied and the customer gets hurt? Also incorporation will allow me to open a business bank account and will make me appear more professional as I try to grow my business.

I do not expect to make much money the first year. I have a full-time job and this is something I am doing (for now at least) in my spare time. I’ve read conflicting information on whether an S corp would require me to pay myself a salary. I don’t expect to realistically make more that one or two thousand dollars in profit the first year, and that’s before taxes and the filing fees for starting my corporation.

In fact, it’s been surprisingly difficult to find any information on starting a corporation on the scale that I will be starting out with.

Has anyone out there started a business on a small scale? I would appreciate any advice or information.

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