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ColdDuck 
LSU Fan
BR via da Parish
Member since Sep 2006
1236 posts
| S-Corp Election (Posted on 1/25/13 at 9:17 am)
So I am an LLC and I want to stay an LLC. What is the cons of doing an S-Corp Election on my LLC? I have very high profits and I am tired of paying the 15% FICA on all of it. Any thoughs? Any extra state things I need to worry about?
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LSUchuck
LSU Fan
Member since Dec 2004
1389 posts
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| re: S-Corp Election (Posted on 1/25/13 at 10:57 am to ColdDuck)
S-corp accounting work will cost you a little bit more since you have to file a separate 1120S return. No state problems since LA gives you an s-corp exclusion. It all flows to your personal income tax return.
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Tigers35355
LSU Fan
Member since Dec 2011
22 posts
| re: S-Corp Election (Posted on 1/25/13 at 11:57 am to ColdDuck)
S-Corp is the tax savings for you and your business. Members of an LLC are subject to employment tax on the entire net income of the business. While only the wages of the S-Corp shareholder who is an employee are subject to employment tax. The remaining income is paid to the owner as a 'distribution' which is taxed at a lower rate if at all!
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ColdDuck
LSU Fan
BR via da Parish
Member since Sep 2006
1236 posts
| re: S-Corp Election (Posted on 1/25/13 at 12:01 pm to LSUchuck)
Say my "profit" is 110K. I then pay myself 100K and keep 10K in the business. I currently take that 100K and transfer money to my personal account once a month. I then have to pay regular Fed taxes and the 15% FICA on the whole amount (110K minus personal exemtpions, etc). If I do an S-Corp election, then I can "pay" myself 50K (with W2) and take a distribution of 50K. Then I only have to pay the FICA part on the first 50K and regular fed on the remaining 60K. So that $9000 savings is well worth the extra couple hundred bucks to my accountant. Am I missing something?
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Tiger at Law
LSU Fan
Baton Rouge
Member since May 2007
1108 posts
| re: S-Corp Election (Posted on 1/25/13 at 1:58 pm to ColdDuck)
Sounds pretty complete
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rmc
LSU Fan
Zachary, LA
Member since Sep 2004
21149 posts
| re: S-Corp Election (Posted on 1/25/13 at 2:27 pm to ColdDuck)
quote:
Say my "profit" is 110K. I then pay myself 100K and keep 10K in the business. I currently take that 100K and transfer money to my personal account once a month. I then have to pay regular Fed taxes and the 15% FICA on the whole amount (110K minus personal exemtpions, etc). If I do an S-Corp election, then I can "pay" myself 50K (with W2) and take a distribution of 50K. Then I only have to pay the FICA part on the first 50K and regular fed on the remaining 60K. So that $9000 savings is well worth the extra couple hundred bucks to my accountant. Am I missing something?
This is my understanding. I actually did that this past year where I was in a ind. contractor situation and making a decent amount of money. I am back in an employer/employee situation and getting W2'd and am in the process of shutting it down. My accountant told me that you should be able to justify your salary. IE you can't pay yourself 20k as a lawyer, while taking a 80k distrubtion. I think what is reasonable is fairly subjective, but the above example obviously isnt.
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SippyCup 
New Orleans Saints Fan
Member since Sep 2008
646 posts
| re: S-Corp Election (Posted on 1/25/13 at 8:37 pm to ColdDuck)
You should definitely move to an S-corp, just make sure you pay yourself a "fair" salary.
Betters me that election soon before time runs out for 2013 elections,
Edit: I am a CPA, but its Friday night and I'm under the influence, so take that for waits it worth.
This post was edited on 1/25 at 8:40 pm
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ColdDuck
LSU Fan
BR via da Parish
Member since Sep 2006
1236 posts
| re: S-Corp Election (Posted on 1/25/13 at 11:36 pm to SippyCup)
Thanks to all. I will talk to a CPA next week and see if this is a good choice.
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Captain Want
LSU Fan
Member since Nov 2009
1291 posts
| re: S-Corp Election (Posted on 1/26/13 at 3:52 am to ColdDuck)
Isn't there a time period to make the election, like 90 days after the LLC is formed? You can't just switch it whenever, right?
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SippyCup
New Orleans Saints Fan
Member since Sep 2008
646 posts
| re: S-Corp Election (Posted on 1/26/13 at 8:29 am to Captain Want)
March 15 if your on a calendar year.
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