I am opening a child care center Need advice on Incorporating or going with LLC?

PLEASE HELP

I am planning on opening a LICENCED child care CENTER "WITH A PARTNER". I just need some advice on what is best for me to do. We are in Minnesota if that makes a difference.
"Should I incorporate or LLC???"

Also if anyone is a OWNER of a child care CENTER, please email me if you are ok with me asking you a few questions on how to go about everything (do's and don'ts)...
Thank You!!!!! :)

PS I have heard (DONT HAVE A PARTNER), The reason I am haveing one is because she has private investors, and also has the schooling and backround we need to start this up. Why not do LLC? Please tell me why this is a bad idea? I need informaive answers please...
Thank you!!

The question between a corporation and an LLC is one best addressed through consultation with a competent attorney who believes in providing counseling to clients. In either case the organizing documents are VERY important.

Here's a quick overview. A corporation is an entity with shareholders. The owners receive stock in the corporation in exchange for investment. It is very important that your By-Laws are carefully drafted to address the rights of shareholders regarding investment, voting, dissolution, dividends, and changes in ownership. You also have tax issues. A corporation normally pays corporate income tax and must file IRS form 1120. If you meet the criteria (US citizens, under 75 shareholders, etc) then you can file an 'S' election. The S election allows pass through of income to the shareholders so that income is only taxed at the individual level. This reduces some taxation but still requires a corporate tax return, it's just filed on an 1120-S rather than regular 1120.

If you choose an LLC then the owners are members rather than shareholders. You need to be very careful about the Operating Agreement. The Operating Agreement spells out the rights and obligations of the members. You need to address ownership, investment, transfer of interest, and tax matters among other things. A multi-member LLC has an IRS default classification as a partnership. The LLC files a Partnership tax return but the income flows through to the members. You also have the option of filing an election to be treated as a corporation for tax purposes and filing corporate returns. If you make a corporate election then you also have the option to file the 'S' election again to be treated like an S corporation.

The big advantage with an S corporation is that it may allow some reduction in self-employment tax. This issue should be carefully addressed by working very closely with a CPA. Do not wait until the year end to have a CPA do tax work. Involve the CPA from the very beginning and have him moniter things closely.

Either form of entity should provide asset protection for the individual owners if properly managed. You need to make sure to follow company structure and truly treat it like a separate entity. Note that a corporation or LLC is person under law. It is a separate being and should not be treated like a personal account. It is very important to keep good records and regulary hold meetins of the company with proper minutes of the meeting.

In short, either corporation or LLC will do the job if properly drafted. The LLC offers more options and requires less formality but the differences are negligible. The most important part is having all company documents custom drafted by a knowledgeable attorney. You simply can not use form documents or fail to adopt proper agreements. The effects of these choices are astronomical. A few dollars now can save tens of thousand later if you do not properly take care of things. Absolutely get an attorney for you right now, have your partner get another attorney, and after the company is formed get a third attorney to represent the company and work with the accountant. This should be a collaborative project with real counseling on the issues.

There are two aspects of your plan that I would consider unwise. They are "with a partner" and LLC . Neither of those are a good way for a small business to organize.