S-Corp vs. LLC (again)
- Thread starter AffApprentice
- Start date
My San Diego consultant just did it for $700 ($100 for him, $600 for fees + services + EIN rush + "corporate seal" + etc), I think LegalZoom was ready to charge me $500-600 for comperable service; You can do it yourself for cheap, I hear the paperwork is easy if you're past the 2nd grade, but I like the security I get from paying a professional to do it for me.
Before you do that, you might wanna look up something called the "gross receipts tax" my friend.... yeeahhhh
the state fees in NY, in NY are like 173$
but you also have to have the LLC published which can cost $700-$1500
without being published your LLC is not a real LLC and you will not be protected by the corporate veil.
but you also have to have the LLC published which can cost $700-$1500
without being published your LLC is not a real LLC and you will not be protected by the corporate veil.
My original estimation in (3-5K in fees) included accounting/CPA fees for running the S corp with filing yearly meetings, stockholder BS, running a real payroll for salary, etc. vs. the non hassle of the running the LLC with none of that extra stuff.
With an LLC you can just use a schedule C on your personal tax return, and not have to do much more work on a yearly basis, so much less accounting fees and general paperwork hassle. I imagine the hassle is probably worth the tax savings if you think you can consistency profit more than 200-250K+ a year, and you want to risk the whole "are you paying yourself a fair salary question" from the IRS.
Also I think if the IRS does ask about the fair salary stuff, I imagine it that might be tough to answer if you are the only person in the biz (it will include even more $$ fees from accountants/lawyers to help you, further limiting your tax advantage vs an LLC). Basically, the more money you make, the more it favors an scorp mainly because of the 3% savings in taxes over 100K. Lookup John Edwards on how to use an scorp to save 500K+ in taxes in one year.
I dont think you can escape the state tax stuff - they will probably find you regardless of where your LLC is so you will need to file as a foreign LLC in your state even if you setup the main LLC in Nevada/Wyoming, etc.
With an LLC you can just use a schedule C on your personal tax return, and not have to do much more work on a yearly basis, so much less accounting fees and general paperwork hassle. I imagine the hassle is probably worth the tax savings if you think you can consistency profit more than 200-250K+ a year, and you want to risk the whole "are you paying yourself a fair salary question" from the IRS.
Also I think if the IRS does ask about the fair salary stuff, I imagine it that might be tough to answer if you are the only person in the biz (it will include even more $$ fees from accountants/lawyers to help you, further limiting your tax advantage vs an LLC). Basically, the more money you make, the more it favors an scorp mainly because of the 3% savings in taxes over 100K. Lookup John Edwards on how to use an scorp to save 500K+ in taxes in one year.
I dont think you can escape the state tax stuff - they will probably find you regardless of where your LLC is so you will need to file as a foreign LLC in your state even if you setup the main LLC in Nevada/Wyoming, etc.
I'm not sure llc vs. s corp is the right question. As others have noted, the llc can elect to be treated as an s corp either from the start or at the beginning of the year in which it wishes to make the election. Furthermore, if you attract the attention of the authorities the 'reasonable salary' distinction might bite you.
I'm just an amateur, but my understanding of the reasons for going full corp are the perquisites. You can put up to 43k(ish) each year in a 401(k), and bennies (health insurance etc) are fully deductible as long as the same package is offered to everyone employed by the company (e.g. your spouse, or as is more typical for this industry: your mom). Plus if you're c instead of S, depending on where the breaks fall your retained earnings may be taxed at a lower rate than your distributed income; this could be meaningful for those who have serious bankroll requirements for ppc.
That giant chunk of tax-deferred income (same for the family member working for you) plus the deductibility of the insurance, etc, is what makes a real difference. S vs LLC is like trying to rank for 'kitty litter paw prints' (not that I could).
If you're planning on doing anything north of 200k, it might be worthwhile to talk to a competent tax attorney.
Or maybe I just made this all up.
-e^i
I'm just an amateur, but my understanding of the reasons for going full corp are the perquisites. You can put up to 43k(ish) each year in a 401(k), and bennies (health insurance etc) are fully deductible as long as the same package is offered to everyone employed by the company (e.g. your spouse, or as is more typical for this industry: your mom). Plus if you're c instead of S, depending on where the breaks fall your retained earnings may be taxed at a lower rate than your distributed income; this could be meaningful for those who have serious bankroll requirements for ppc.
That giant chunk of tax-deferred income (same for the family member working for you) plus the deductibility of the insurance, etc, is what makes a real difference. S vs LLC is like trying to rank for 'kitty litter paw prints' (not that I could).
If you're planning on doing anything north of 200k, it might be worthwhile to talk to a competent tax attorney.
Or maybe I just made this all up.
-e^i
This is the first year of my s-corp but from what I've heard the tax benefits are worth going for the s-corp.
From my experience so far, an s-corp is a shit ton of work, but it can definitely be rewarding. Sorry I don't have more advice. Let us know what you go with.
From my experience so far, an s-corp is a shit ton of work, but it can definitely be rewarding. Sorry I don't have more advice. Let us know what you go with.
this. some of the advice in here (like people saying you should always do an llc lmao) is just fucking wrong. get a cpa, get your shit set up right using their help, and save yourself a lot of anguish. don't read any of the bullshit in this thread other than the above quote.