LLC, S-Corp or no?

There is really no reason to create an S-corp. It has quite a bit of additional costs due to filing requirements, record keeping, governance structure, etc. When you file an LLC, you have the choice to be taxed as a C-Corp, S-Corp, Partnership or Individual. You can get the vast majority of the legal protections and tax benefits by incorporating as an LLC and electing to be taxed as an S-Corp.

 

I have had both S Corp and LLC and because I am a single member LLC the taxs are handled much like a sole proprietor or DBA. In hindsight I should have NEVER been an S Corp as there are too many rules and headaches for me not to mention extra expenses. But to each their own. Just my two cents worth.

 

S-Corp allows you to leave all profit in the company and take a salary just big enough to cover your tax obligation. You can keep from paying as much tax by keeping profits in the bank.

LLC requires you take ALL profits as personal income and you are taxed on all of it.

If you net 100k, as an LLC you claim 100k...as an S, you pay yourself a $25k salary to cover social security OR whatever salary you need to take to cover your situation and the other 75k sits in the bank tax free.

Consider the legal protection as well. If you have either and you don't have every t crossed and every i dotted, a court could find that you're not protected by either entity and allow someone to sue you personally for everything you own...which is the whole reason to incorporate in the first place.

 

FALSE. As an LLC, you have the option to elect to be taxed as an S-Corp. This gives the tax benefits of the S-corp, without the expense of actually creating an S-corp.

You can ALSO elect to be taxed as a sole proprietor or even a partnership or C-corp (god forbid), but virtually everyone with any understanding of the tax code elects to be taxed as an S-Corp.

 

False?

An LLC electing to file taxes as an s-corp isn't the same as being an s-corp. Besides, the laws will change again...when I became an s-corp, LLCs weren't around.

 

Yes, the quoted part is pertinently false. An LLC with an IRS S-Corp tax election is taxed EXACTLY the same as an S-Corp is at the Federal level, as well as most (all?) states.

 

What I said may have been incomplete (I didn't assume they were filing an LLC as an s-corp), but not false.

 

Interesting note, from what I have read, the corporate veil of protections are a little weaker when you have a husband/wife as owners. Bringing in someone outside of the marriage will give you better protection. But can you trust that "other" owner is the question- lol.

 

We did a LLC with S Corp election. To us, it is very simple and works well. But as others have said, talk to a good CPA who has good knowledge in taxes as well, as they may steer you in another direction. It is worth the money to pay for good advice and changing things down the road is PIA.

 

Every time I bring up this idea I get hit with a hot frying pan!