If not, you might want to go the S corp route so you’ll be covered when you retire. Then again, depending on what comes out of Washington, Social Security and Medicare might not give you much benefit ten or twenty years down the road. It’s a real gamble.
The long and short of the results from meeting with a CPA and attorney are: As an LLC is simpler to run than a true S-corp (less meeting and paperwork requirements), the best structure for me seems to be an LLC with S-corp designation for tax purposes. I’ll get the SE tax break on the pass through profits with less headaches.
“Reasonable” salaries for my wife and I are going to be based on the local economy, since my peers live all over the US and the world and some take the full profits as salary and some are doing what I am doing-setting up an LLC, or corporation, taking partial salary. As the local economy is extremely poor, I can claim a fairly small salary as “reasonable”, but still stand well https://besthookupwebsites.org/tr/alua-inceleme/ above the median salary for this area. My CPA thinks this is the best argument I can have, given my situation and it shouldn’t raise any eyebrows at the IRS.
15% on about 30K. Additionally, we both are still socking away a few Social Security credits for retirement (on our 70K), assuming there will be anything left in SS to pay out when we finally pack it in and retire.
Finally, in Michigan there are no real “State” issues for me. The Michigan Business Tax lower limit is 350K and I wont be reaching that any time soon, so I have only state income tax to worry about.
All in all, I’m happy with my CPA and Lawyer and would recommend surrounding yourself with professionals before you pull the trigger on any business venture!
Hi, My partner and I are cotemplating starting a business. He is is a UK citizen and I am US. He agrees that the company should be a US company. Initially there won’t much of a profit from the company (at least not the first year). Given the multi-nationality of the owners, is there a preference among LLC, S-corp, and C-corporations to choose for the formation of the company? Thanks in advance.
Additional costs of LLCs. LLCs can also be subject to state-specific fees. For example, the state of California charges an annual minimum franchise tax of $800 to both S-Corps and LLCs.
Thanks – that helps a lot
As a CPA I mostly agree with Zack. Good points. We generally don’t recommend S Corps to our smaller clients because of all the expenses involved.
Off topic, but Johnatan hasn’t posted in a few days. Anyone have word if he is taking some time to himself away from the blog, or a vacation? Just curious.
But there are obvious drawbacks to LLC. You can own a health insurance account in LLC (husband and wife). I think its tough to do Solo 401 but can do SEP and so froth.
Also according to biztaxtalk discussion, its is tough to form a self health insurance in LLC but easy in SCorp which is good. So they both have pro’s and con’s but LLC is less hassle and still have advantages.
Also, thanks for advise on going with a CPA. I am actually looking for one and don’t have problem paying but I am having tough time find the right person. They are also asking too much which is what killing me because I almost got it complete except few things. Will keep trying.
Since money get taken out of my other job and uncle sam owes me money at the end of the day, do I really need to border about paying estimated taxes? In my other job, I am claming zero dependent, but I actually have 4 dependents that I will claim during tax filing, I did this so that uncle same to get a larger share upfront.
So, if I just pay myself by the hour, even if it’s a high hourly salary, as should be for the owner of a company, it would be very little considering I only really put in time in the beginning. Hmmm. Good call. Thank you. And yes, I NEED to get on top of the IRS ball. More importantly, I need to get to work putting this great idea I have into action. I decided to do that and quit letting the little life issues get into the way. I even ordered my business cards yesterday in order to begin my “plan” as I had set out in the beginning. Wish me luck!
SO, after all of this, I have an S corp (Filed in January of this year in Maryland) with a whopping $649 income (total, MUCH more in expenses) since we’re just getting started. We have filed with the IRS and received our EIN number (There are only two of us, myself and my partner) We have to file a form 1120 by according to the confirmation letter we received from the IRS. From what I gather, we do not have to file quarterly. Have I missed something here? Thanks a million in advance. -McDegga
Yes – our accountant filed the extension. We’re just trying to wade through this on our own to see if it is something we can handle. Seems well worth the fee to get a professional to handle. thanks again – you’re a gem!
I think another option is to open up an LLC but elect to be taxed as an S-Corp
My wife and I signed for the franchise territory (10 years) as 50-50%. I’ve heard varying opinions on whether I should setup as an LLC or S-Corp, and whether to only have myself on the company, or to split with my wife. We want the simplest and most cost-effective (taxwise especially) setup for the business.
Im confused. If the S corp doesn’t distribute the funds, is it safe to say that there is no tax on the fund’s remaining in the s corp? If that is the case, could the fund’s be distributed in another fishion? Say to an llc that owns the office building. Never mind the fact the owner A of the S-Corp is the same Owner A of the LLC property managment?
Thank you for all the above information and conversations, they have really helped. I have a situation that I’d like to get some opinion on:
The S-corp has not earned any income and I never paid myself a salary as the only work that I have done is hire the company to build the website in the fourth quarter. Should I have started an LLC? I believe that I have to pay about 800 for the right to do business in NY for 2009. What should I do about not paying myself a salary?