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Forming an S Corp. Cheapest way to do it? Benefits vs LLC?
Posted on 4/30/16 at 11:15 am
Posted on 4/30/16 at 11:15 am
School a novice such as myself in these matters.
5
Posted on 4/30/16 at 11:24 am to Cosmo
You can form an LLC and then elect to be treated as an SCorp. The two aren't mutually exclusive. You get the legal benefits of an LLC (limited liability), while having the tax benefits of being treated as an S Corp (pay yourself a salary to reduce self employment tax). I would sit down with a CPA to discus your specific situation.
Posted on 4/30/16 at 11:24 am to Cosmo
I'm pretty sure I've read that S-Corps are better if you plan on raising investment and potentially having an IPO (i.e. better for tech companies). If neither of those apply, I think LLC is probably the way to go.
Posted on 4/30/16 at 11:26 am to Spock
Already talked to a CPA. Sounded like S corp was the way to go to draw my salary then issue a "bonus" quarterly or something to reduce taxes a bit.
But he was saying i need to set it up with a lawyer. I cant do this on legalzoom or something for a few hundred bucks?
But he was saying i need to set it up with a lawyer. I cant do this on legalzoom or something for a few hundred bucks?
Posted on 4/30/16 at 11:41 am to Cosmo
quote:
Sounded like S corp was the way to go to draw my salary then issue a "bonus" quarterly or something to reduce taxes a bit.
You can do that by forming an LLC and electing to be taxed as an S-Corp. That's not to say that an LLC is the correct answer for your situation, but if the only reason for the S-Corp is for that benefit then an LLC will do the trick as well.
Full disclosure: I'm a CPA
Posted on 4/30/16 at 12:10 pm to Cosmo
quote:
few hundred bucks?
Check out La Secretary of State website for online formation. You might want to consult a lawyer but it only costs about $100 to form an LLC.
Posted on 4/30/16 at 2:39 pm to SLafourche07
isn't the deal with an S corp is that you HAVE to pay yourself a salary whereas with an llc you can do that or take a draw whenever you want
Posted on 4/30/16 at 3:51 pm to arn
The advantage of an S-Corp (or LLC opting to be taxed as an S-Corp) is that you pay yourself a reasonable salary and all of the employment taxes that go along with that, and then the rest of your profit can be distributed and you don't have to pay the employment taxes. You still pay the income taxes on the distribution.
An LLC taxed as a partnership or sole proprietorship pays employment taxes on all of the income.
An LLC taxed as a partnership or sole proprietorship pays employment taxes on all of the income.
Posted on 4/30/16 at 4:37 pm to Cosmo
quote:
But he was saying i need to set it up with a lawyer. I cant do this on legalzoom or something for a few hundred bucks?
I've never been through the process, but you can form a LA LLC online for like $100 or so and the election to be treated as an S Corp is literally filing one form - 8832 Entity Classification Election. You can fill it out and just mail it to the IRS.
Posted on 4/30/16 at 9:33 pm to Cosmo
quote:
But he was saying i need to set it up with a lawyer.
A CPA who won't set up an LLC? Seems kind of odd.
Posted on 4/30/16 at 11:50 pm to Cosmo
S Corp will reduce your self employment tax (15%) but you have to be on a salary amount...and can still take bonus money.
Posted on 5/1/16 at 9:04 am to GeeOH
I had a lawyer file my corporate forms and told him at least 3 times I wanted to be an S corp. He didn't file the S election form. 3 years later the IRS caught it. I had to refile 3 years worth of taxes as a C corp. It was a nightmare. IRS man called me grossly negligent and gave me 1 week to come up with 30K or face garnishment. I told him I had a CPA and a lawyer handle this and they may be grossly negligent but how was I? He proceeded to chew me out about as bad as I've ever been chewed out. Borrowed the money and paid the IRS. CPA redid the 3 years worth of taxes. Somehow I ended up $800 to the good. I love my CPA. Long story to say make sure the S election is filed.
Posted on 5/1/16 at 10:12 am to SippyCup
There is a fine line between providing tax advice and providing legal advice/services when it comes to entity formation. I'm a CPA, and I insist clients use an attorney to set up any business entities that have more than one owner. There are too many legal issues to consider to claim that you avoided them all in your discussions with the clients. Practicing law without a license is something prudent CPAs want to avoid.
Posted on 5/1/16 at 11:34 am to Cosmo
From what I understand, banks are not fans of first timers using s-corps.
Posted on 5/1/16 at 12:03 pm to Cosmo
I used an attorney for my S-corp years back.
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