LLC. Advice

If any of you are setup in a LLC you need to elect to be treated as a s-corp. This allows you to take a salary of x and what is left over is treated as a dividen paid by the company. Dividens are not taxed the same as normal income. Have your cpa or tax attorney explain it to you or google it and educate yourself. Definite tax savings and it is legal. I do it for both of my companies.

 

That is incorrect. The remainder is ordinary income, and is not a qualified dividend subject to the preferential dividend rates. The remainder, however, is not subject to self-employment taxes.

 

TaxPhd it is a dividend. I didn't say anything about being either an ordinary or a qualified dividend. The point I was trying to make is that you can skirt a large chuck of profits from paying the self-employment tax. If you take a salary of $65k and have a left over profit of $25k then you can save around $3750 from not having to pay the 15% employment tax.

 

No, it's not a dividend. It is a distribution. The only way an S-Corp will have a dividend payment is if it has prior earnings as an C-corp that it is paying out to the shareholders.

The distinction is important. Dividends are taxable, whether at preferential qualified dividend rates, or at ordinary income rates. S-corp distributions, on the other hand, are not taxable.

 

This is Wrong!

Incorporation = Double Taxation:

What that means is your company would have to pay quarter "revenue" tax and you would pay "earned" income tax and Social Security (on what ever you paid yourself), you would also have to pay "unearned" income tax on dividends (profits) you received from the company.

LLC, LLP, LLP Ltd, & Partnerships = Single Taxation (Pass Thru Taxation):

The way this is handled is you receive NO PAY! You only receive the dividends (profits) of you company. This means you only make money when the business makes money and you lose money when the company loses money. Now you are only tax as 100% "unearned" income and you don't pay Social Security (so you better make other plans)

* NOTE: LLP, LLP Ltd, and Partnerships must be dissolved (sold off) and all debts settled upon the death any partner or request of any partner who no longer wishes to be apart of the business. LLC's do not and can be entrusted (left to someone in a will).


All types of business listed above offer the same type of corporate protection so long as the "Corporate Vail" in not pierced!

 

This is Wrong too!

As I already explained in my last post the advantages in taxation I will just address the point of corporate protection.:

I will skip the history of partnerships, corporations, and Limited Liabilities. We are talking about a Limited Liability Corporation (LLC) so lets talk about it.

You can start a LLC for about $50.00-$300.00 depending on how and where you do it. It take 1-3 hours depending on how and where you do it. Heck you search the internet find a processing company and do it over phone and have the paperwork faxed to you in an hour or you can pick up LLCs for Dummies and do it yourself.

You in business!

You stop at the truck stop to eat and shower. You come out the shower to find your truck is on fire and over the next 1 hour it spreads to two other trucks. The fire department puts out the fire and leaves. What happens now?

Most people would say well the insurance will pay for it. Wrong!

The fire insurance will pay off your note on your equipment and what ever is left will they will pay to the two other trucking companies. But it isn't enough to cover the damages, so your company pays the difference.

The same happens with the three loads that were destroyed.

You company doesn't have the money so you are out of business and all the LLC's asset are sold off.

OH, But because you have corporate protection, they can not touch your car, boat, camper, motorcycle, house, future earnings or any other personal asset.

If you are driving and you run over a family and you are found liable for $10 million and you have a $1 million policy then yes you will lose everything, both the company and personal assets. Every driver on the road regardless if it is a POV or CMV, weather they are a company driver or not, the same would happen!

 

This is Wrong!

As I already explained in an earlier post. DO NOT PAY YOURSELF! You have Pass Thru Taxation on unearned income which are the dividends (profits) of your business.

Think like a business person that's what you are now. If you pay yourself or you are incorporated then you are self-employed.

If you owned enough stock in Textron to make $150,000 a year in dividends are you self-employed? No, heck you might not even know what they do or where their located but your making unearned income off of them.

Ok, maybe some people are worried about retirement. You can pay Social Security if you want, I wouldn't. You can walk into any bank in the U.S. and talk to a Financial/Retirement agent for free and they can do a lot more with your money than Social Security ever could.

 

If the fire was due to your personal negligence your personal assets would be at risk .

 

Incorporating as a C corp means (potentially) double taxation. Incorporating as an S corp means a single level of taxation.

"Quarter revenue tax"? No such thing. "Unearned" income tax? Are you just making stuff up? By the way, dividends and profits are not the same thing.

Again, dividends and profits are not the same thing.

Please explain to everyone how with these entities, you don't have to pay Social Security.

 

It is not wrong. It is a 100% true and accurate statement regarding taxation of earnings in an S corporation.

Still waiting to hear how you avoid paying Social Security. . .