Taxes, LLC, S-Corp - Blahhhhhh

macromj88

macromj88

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Nov 9, 2009
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The US of A
I know, 13 days left to file and I'm just starting - have all my books together, thankfully.

Problem is I formed an LLC (single member) and just found out I get taxed as a Sole Proprietorship unless I elect otherwise (too late for that) - and overpaid a lot by not being an S-Corp!

Wanted to post this to see what kind of tax strategies people here are using, how are you saving some money, creative loopholes, etc

And if you haven't filed yet, 13 days, tick.tock.
 


macromj88 said:
I know, 13 days left to file and I'm just starting - have all my books together, thankfully.

Problem is I formed an LLC (single member) and just found out I get taxed as a Sole Proprietorship unless I elect otherwise (too late for that) - and overpaid a lot by not being an S-Corp!

Wanted to post this to see what kind of tax strategies people here are using, how are you saving some money, creative loopholes, etc

And if you haven't filed yet, 13 days, tick.tock.
Click to expand...

I don't understand why you would be taxed differently as an S-Corp than a single member LLC. I always understood that both are pass-through taxation, no?
 
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I have two companies, one set up as an LLC and one as an s-corp. Each has slight advantages and disadvantages depending on your situation but long story short, pay a professional.
 
Been thinking of either dissolving my LLC and forming a new S-Corp, or figuring out what I need to do to convert the LLC into an S-Corp. I know that there's good's and bad's for both setup's, but I like the idea of saving on the Social Security tax with the S-Corp. Although I'll have to setup a payroll etc. I need to get with someone to figure out the best way to go. My current CPA isn't overly creative with my taxes. He's an ex-IRS auditor, so he knows how far to push stuff without getting on the radar, but he's definitely on the conservative side.
 
Have 2 s-Corps, i would recommend to pay accounting. It's his job to make you pay less. He will tell you what to do in your situation.
 
LLC is pass-through and you will pay self employment tax and fica and all that. It's too late to change now. But after this elect to be taxed as an S-Corp. You can keep the LLC but just choose to be taxed as an S-corp. But get a CPA if you make a bit of money because the hassle of an S-corp isn't worth it unless you make a certain amount of money. And there are a ton of other issues like how much to pay yourself, and on and on. Getting a good CPA will be the best thing you do.
 
micgamb said:
LLC is pass-through and you will pay self employment tax and fica and all that. It's too late to change now. But after this elect to be taxed as an S-Corp. You can keep the LLC but just choose to be taxed as an S-corp. But get a CPA if you make a bit of money because the hassle of an S-corp isn't worth it unless you make a certain amount of money. And there are a ton of other issues like how much to pay yourself, and on and on. Getting a good CPA will be the best thing you do.
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Yup, look up the minimum you can pay yourself for your line of work, and if you make more than that, go the route of S-Corp..

So if you pay yourself a $50,000 salary.. but you netted $100k, that's $50,000 you don't have to pay the 15% self employment tax on ($7.5k savings). Just more paperwork, gotta hold "meetings", payroll, it's more of a hassle so you have to make more than that minimum amount for it to be worth it.

..that's what I believe I know at least.
 
efeezy said:
Been thinking of either dissolving my LLC and forming a new S-Corp, or figuring out what I need to do to convert the LLC into an S-Corp. I know that there's good's and bad's for both setup's, but I like the idea of saving on the Social Security tax with the S-Corp. Although I'll have to setup a payroll etc. I need to get with someone to figure out the best way to go. My current CPA isn't overly creative with my taxes. He's an ex-IRS auditor, so he knows how far to push stuff without getting on the radar, but he's definitely on the conservative side.
Click to expand...

http://www.irs.gov/pub/irs-pdf/f2553.pdf

Payroll by Paychex: Payroll Tax Services, Human Resources, 401(k) and Benefit Administration

Problems solved
 
Dwight Schrute said:
I don't understand why you would be taxed differently as an S-Corp than a single member LLC. I always understood that both are pass-through taxation, no?
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Technically they are both pass through, but since an LLC is not recognized by the IRS you are treated as a "disregarded entity" and will have to pay a self-employment tax of 15.3% (social security and medicare). To avoid that, you can elect to be treated as an S-Corp which will probably save you money but check with your tax person.

efeezy said:
Been thinking of either dissolving my LLC and forming a new S-Corp, or figuring out what I need to do to convert the LLC into an S-Corp. I know that there's good's and bad's for both setup's, but I like the idea of saving on the Social Security tax with the S-Corp. Although I'll have to setup a payroll etc. I need to get with someone to figure out the best way to go. My current CPA isn't overly creative with my taxes. He's an ex-IRS auditor, so he knows how far to push stuff without getting on the radar, but he's definitely on the conservative side.
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Get with your CPA and have him file form 8832 to have your LLC taxed as an S-Corp. You do not need to dissolve it, you're simply changing the designation of it with the IRS so they know how to tax you.

@op - it may not be too late to make the change for last year, check with your CPA. Also, filing deadlines are different for businesses than they are for personal, keep that in mind.
 
My accountant said be very careful going S-Corp. SE tax is a bitch and its awfully attractive to take a % of your net income and avoid the SE tax.

A single member S-Corp in which nearly 100% of the income comes in purely from your work it will be very hard to justify that only X should be salary and Y should be a disbursement.

If you say ahh fuck that who cares. He went on to say over 50% of single member S-corps taking a disbursement are being audited by IRS. I will take a pass and stick with LLC until things get way more complex.
 
No one cares that an S-Corp provides no liability protection? I mean tax benefits are great and all but what happens when someone sues you and takes all your corporate + personal assets?
 
cheshire said:
No one cares that an S-Corp provides no liability protection? I mean tax benefits are great and all but what happens when someone sues you and takes all your corporate + personal assets?
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LLC, S-Corp, and C-Corp all over roughly the same legal liability protection.

Maybe you were thinking of "Sole Proprietorship"?

The only scenario I can think of where an LLC or S-Corp might offer less liability protection than a C-Corp is in a post-bankruptcy situation. And that's more about tax liability than legal liability.
 
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