The nature of your for-profit business (coffee shop) is irrelevant when determining a business structure. It is the structure of ownership, location (or jurisdiction), financial condition and your future intent for your business that is used to determine its structure. The same tests apply for clothing shops, restaurants, manufacturing businesses, hair salons and dog groomers.
The LLC and S-Corp are largely similar entities, with minute differences that should be interpreted by a legal professional (to estimate potential legal liabilities) and accounting professional (to determine tax liabilitiy) for your specific situation. What works for the 'average' small retail business owner may be fine for you or it may be financially disasterous - we don't have enough information to make that determination.
I'm speaking about 'improving restaurant coffee' and judging at the South Central Regional Barista competition. You can get more information about the show and register at http://www.restaurantville.com .
For many reasons business incorporation is the safest, smartest choice for structuring a new business. Protection of personal finances, ease of attracting investors, and the tax advantages of corporations are all good reasons to consider incorporating a business rather than simply going it alone. I also incorporated my business through a business incorporation specialist and I also recommend them to everyone.
When you’re weighing an S corporation versus an LLC, there are a number of factors you need to consider. Having a tax lawyer or accountant examine your situation and help you determine your needs is always advised.
Owners of an LLC are considered to be self-employed and therefore must pay a "self-employment tax" of 15.3% (goes toward social security and Medicare). The entire net income of the LLC’s business is subject to self-employment tax.
For S corporations, only the salary paid to the owner-employee is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. Therefore, an owner of an S corporation stands to realize substantial employment tax savings.
