re: Paying yourself as an employee

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When do I have to make that status change to be able to do this? I'm too late to do it now for 2014 taxes, correct?

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Too late for 2014, but you have until March 15 to make the election for 2015. The election is made using Form 2553.

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So who pays the taxes on that $100k in your scenario?

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You will still pay income tax on $150,000 in either scenario, but you will avoid paying Social Security and Medicare taxes on a portion electing S-corporation status. You need to discuss with your tax advisor how this would apply to your specific circumstances, and how much benefit you could realistically achieve.

The caution about income from personal services is a real one. If your income is from personal services you might be better off being taxed as a disregarded entity and being able to contribute more to retirement.

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In order to get any benefit from paying yourself as an employee your LLC has to elect to be taxed as a S-corporation, and you have to pay the shareholder-employees reasonable compensation. If the shareholder-employees are paid reasonable compensation, then the net income from the S-corporation will not be treated as self-employment income subject to self-employment tax. It is therefore possible to limit the amount of tax paid for Social Security to just the amount of compensation.

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i was wondering when we'd have a non-"guess" answer.

So what do you do with the rest of it if you don't take it as income? Do you just have that much in 'business expenses'?

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Nope. Try to minimize what shows as profit and pay taxes on it. I'm not going to weaken my company by draining every penny from it. I do maximize HSA, 401K, etc. to reduce my burden.

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So the net difference from what you paid yourself "reasonable salary" and what you actually made you put into HSA, 401k, etc? And that's how to not pay the 15% on that net difference? It has to go back into the company and not into your pocket?

So I can't just take all the money I make and put it into my bank, as an example, and just pay myself a "reasonable salary" to save 15% on $xxx, correct?

Until you file your income taxes. Then that distribution isn't so tax free.

How isn't it tax free? You are paying taxes on s corp earnings whether you take the money or not.

You answered the question yourself. I pay taxes on profits whether I leave them in the company or pay myself in the form of a disbursement. Neither avenue is tax free.

Correct. The taxable event is the profit, not the distribution.