I was set to start an LLC, until I learned about the potential tax savings of a S corp. The main reason for going the LLC route was for simplicity. It probably will not matter the first few years, but I could see the tax savings in the future by going with a S corp. I just want to make sure I am understanding everything properly.
Basically, a LLC is taxed just like a sole proprietor. Therefore, I would have to pay self employment tax up to $113,700 (medicare tax has no cap).
With a S corp, I will have to pay self employment taxes on my wages only and not my net income distribution. In my industry, a managing partner could have a reasonable salary of 55k to 70k.
In my situation, would it be better to go with a S corp? Do you think the tax savings would outweigh the benefit of not having as much paperwork with an LLC?
It seems like an S corp would be a better option for a sole owner making less than 113,700. Is the additional paperwork of a S corp with the tax savings?
Basically, a LLC is taxed just like a sole proprietor. Therefore, I would have to pay self employment tax up to $113,700 (medicare tax has no cap).
With a S corp, I will have to pay self employment taxes on my wages only and not my net income distribution. In my industry, a managing partner could have a reasonable salary of 55k to 70k.
In my situation, would it be better to go with a S corp? Do you think the tax savings would outweigh the benefit of not having as much paperwork with an LLC?
It seems like an S corp would be a better option for a sole owner making less than 113,700. Is the additional paperwork of a S corp with the tax savings?
via Small-Business-Forum.net http://ift.tt/1jTWPp7
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