Corporation vs LLC

I am a S Corp. was told for 100k profit I could save atleast 7k in taxes.

 

There is nothing stopping a deeper pocket from making your life miserable through purely legal means, no matter what your corporate status. Adding the LLC or INC style corporation is merely an additional firewall from liability in this sense. That being said, the only firewall is for personal assets--they can still take everything remotely related to the business without piercing the veil.

To wit: All of these things vary by situation and litigant. A weird ruling in one state's corporate law may make things work entirely differently there than they do in the rest of the country.

A cargo claim that insurance doesn't want to pay: As far as business liabilities go, this is one of those cases where it's a bad bet: It's always better to go after the insurance rather than the individual. In the case of an uninsured load, the legal fees are often going to eat up anything you'd otherwise recover in court.

Inability to pay off a bank credit line: If the bank doesn't make you personally guarantee a business debt, and the business keeps proper records and follows some other rules, then this will protect the individual behind a corporation. That being said, the banks and lenders have a lot of ways of putting you on the hook for things.

Factory sues you for a late delivery: They might refuse to pay, but they would be really going out on a limb trying to hold a trucker liable for a late delivery under normal circumstances. While I'm sure places have tried, this is one of those kinds of torts that, absent a contract issue, ends up getting thrown out on summary judgment. (After both sides have already spent thousands on lawyers.)

 

An LLC can be an S-Corp if you file the right form with the IRS.

You could save a lot in taxes with an S-Corp, or you could end up paying more in the end. It all depends on how much you make, how much you want to pay yourself and what kinds of things you're doing in the given tax year.

 

Do tell! I love to hear more experiences.

I also haven't been in a courtroom in years, so everything I'm saying could have changed since then.

 

@LillyLoo An LLC will save you nothing on taxes. You are confusing legal and tax terms. As stated above, an LLC is a legal entity created to protect your personal assets in case your company is sued. Whether it is effective or not is debatable. As an LLC you can choose to file your taxes one of two ways.
1)Individual (Sole Proprietor) You track income and expenses and fill out the same Form 1040 using Schedule C for the business info. You would receive 1099sfrom companies you deal with.
2)S Corporation. You and/or your husband would be employees and receive W-2s from the S Corp. The S corp files its taxes on Form 1120s. It does not pay income tax. All profit is passed through to you, the owners of the company on Form K-1. The corp is required to pay withholding for its employees throughout the year. Probably quarterly on Form 941. These payments include the employees ss/medicare contribution and income tax withholding.

In post 10 above I described how an S Corp can save you some money with random numbers.

Your accountant is probably right that at this point you should stay as a Sole Proprietor until you have some numbers to work with.

Good luck

 

It is also debatable how much a reasonable salary owner operators should pay themselves (per IRS). 50/50 60/40...?
Let's say an owner operator makes only 50K profit after a poor year. What his salary is supposed to be? What if they make 150K a year, should they pay themselves no less than 50K as salary ...and 100K as dividends. What's the right balance? Some brave pay themselves as little as 25 % in salary or wages, saving a lot on payroll taxes but IMO that's too daring and can be questioned.

 

Well you'll have to deal with what I've already posted in the form of the post.

I assume you are not a truck owner or fleet owner.

The IRS expects a reasonable amount of compensation based on the industry averages.

But as I said, it is between the accountant and the person based on their personal needs and situation.

Any way you cut it, you will pay some taxes.

 

No, I'm actually still on my CLP, I got a ways to go before I can pass my skills test.

In the S-Corps I helped start, I always asked the owner how much they made when they started in the industry they went independent in and plugged that in for the first two quarters and adjusted from there. They only really scrutinize it in audit when the business clears more than $500,000 and the gross officer wages are less than $43k (or whatever the FLSA exempt wage is).