Need tax help for setting up LLC

[fiveoh]

I just formed an LLC for some oil and gas related investments I will be making related to my job.  There is some litigation risk involved so I figured an LLC will shield my personal assets from that.  Come to find out I may be wrong.  The IRS considers a one member LLC a "disregarded entity" and it seems does not always protect an individual against personal liability risk in a lawsuit. 

What do I do here?  I see I can file a 2553 to be taxed like an S corp or a 8832 to be taxed like a  C Corp instead.  What are the disadvantages/advantages of these over a single-member LLC? 

[stuckinmn]

It's a disregarded entity for income tax purposes but not necessarily for litigation purposes.  All income will flow to your personal tax report but your personal assets may not be subject to satisfy a lawsuit against the company, depending on all sorts of facts and state law issues.  This is not legal advice, yada, yada, yada.

[fiveoh]

It's a disregarded entity for income tax purposes but not necessarily for litigation purposes.  All income will flow to your personal tax report but your personal assets may not be subject to satisfy a lawsuit against the company, depending on all sorts of facts and state law issues.  This is not legal advice, yada, yada, yada.

This site

http://www.nolo.com/legal-encyclopedia/single-member-llcs.html

" An LLC provides the same protection as a corporation against creditors of the business. However, there is some uncertainty as to whether a SMLLC member will receive the same protection from liability that members of an LLC with multiple members receive. While the law is clear in most states, this is still an evolving issue."

and several others seem to say that it may not hold up to litigation. 

This will be a relatively small company so I'd rather not pay for an accountant or attorney atm. 

[stuckinmn]

That's why I added the disclaimer of it depends on state law issues.  A lot will depend on the law where you are organized and where you are sued which will most likely be where the oil investment is depending on the type of claim made

If you are concerned about it an S Corp gets you the same flow through taxation but better lawsuit protection.  A C Corp will subject you to a corporate tax then dividends to you will be taxed as income to you.  Both give you the same lawsuit protection as they are both the same under state law (the S Corp and C Corp are merely tax designations )

Keep in mind you will actually have to change the company structure to a corporation for the protection as filing a form with the irs electing how you want to be taxed does nothing for the lawsuit.  They are 2 different issues.

[Wile E. Coyote]

If you are concerned about it an S Corp gets you the same flow through taxation but better lawsuit protection. 

They will give you very similar results since shareholders report the income earned by the S corporation, but they are quite different when it comes to actual filing obligations and the application of certain tax rules.

Personally, if simplicity were important to me, I would go with the LLC as I do not consider the risk of "piercing the LLC veil" to be very material.

[Icecreamarsenal]

Litigation risk is state specific for llc. The veil is generally thicker for a corporation ("body", it's own body), as opposed to an llc, a "company" and not a "corporation."
A corporation classically has a board. There are one person corporations, but they usually require the assistance of either a cpa or a lawyer. And the meeting minutes are hilarious.
Tax implications are pass through for llc and s corp; c corp is double taxation. You can carry losses forward through the next fiscal year as a c corp as capital losses.
You can also form an llc and file taxes as a c corp.
Good luck