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Small Side Business - Which Type? (Legal/Tax Purposes)
Posted on 4/20/15 at 1:10 pm
Posted on 4/20/15 at 1:10 pm
Wife is involved in a small partnership side business selling various items (shirts, trinkets, etc.). There are only 2 people involved, 4 if you include the husbands.
Should they declare as a legal/tax business? What are the advantages to this? They currently have a separate checking account and nearly all the cash flow is through it, so it's decently segregated from our own funds.
Which type of business/corporation should they declare?
I'm lost here. S-Corp, LLC, Partnership. I have no idea what's the advantages or what's available or why they should declare. They do some charity fund raisers (selling shirts for individual's fundraising, medical bills, etc.)., so possibly some favor there. Right now nearly all the funds are reinvested in supplies, tools, etc. I've tried to research online, but not sure where to start or what to focus on. Most of the articles tend to focus on the "How to be Successful" vs the legal/tax nature that I'm trying to find.
Should they declare as a legal/tax business? What are the advantages to this? They currently have a separate checking account and nearly all the cash flow is through it, so it's decently segregated from our own funds.
Which type of business/corporation should they declare?
I'm lost here. S-Corp, LLC, Partnership. I have no idea what's the advantages or what's available or why they should declare. They do some charity fund raisers (selling shirts for individual's fundraising, medical bills, etc.)., so possibly some favor there. Right now nearly all the funds are reinvested in supplies, tools, etc. I've tried to research online, but not sure where to start or what to focus on. Most of the articles tend to focus on the "How to be Successful" vs the legal/tax nature that I'm trying to find.
2
Posted on 4/20/15 at 1:30 pm to LSUtigerME
LLC
Posted on 4/20/15 at 1:47 pm to LSUtigerME
Depends on what the long term goal is (obviously), but I'll share what I have decided, based on recommendation of my CPA.
LLC, electing to be taxed as a S-Corp. The allows us to pay ourselves as employees (and deduct FICA as a business expense) as well as take distributions subject not subject to SECA taxes (self employment tax).
We were also interested in maximizing 401k contributions, and this will allow us to contribute as "employees" as well as set up profit sharing (basically a company match), which is a business expense.
This may be a little much for a side gig, but worth looking into.
LLC, electing to be taxed as a S-Corp. The allows us to pay ourselves as employees (and deduct FICA as a business expense) as well as take distributions subject not subject to SECA taxes (self employment tax).
We were also interested in maximizing 401k contributions, and this will allow us to contribute as "employees" as well as set up profit sharing (basically a company match), which is a business expense.
This may be a little much for a side gig, but worth looking into.
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