Any Opinions on Setting Up an S Corporation?

[scagnt83]

But can you pay yourself distributions as an LLC? I'm set up as an LLC and file as an S Corp (that's an option you have when setting it up).

I'm a big fan of staying as an LLC and taking the subS election for taxes. Best of both worlds. Easier admin than a true SCorp and lower FICA than a LLC.

 

[goget]

I was about to ask the LLc with the sub chapter S seems the way to go.So lets say you make $100k and take $50k of salary and your expenses are $25k.That leaves $25k left over at yr end. Do you just take the $25k as a yearly distribution at year end and claim it as a dividend? So its taxed at dividend rates of 20% max with no social security taxes?Were are your business expenses during the year paid from the sub s or the llc?Does the insurance company pay commissions to your llc or subs?Are the commissions 1099'ed( most insurance co's don't 1099 corps) When buying E and O insurance do you list the llc or sub S?What name are credit cards for the business in?I would think just your name?

 

[scagnt83]

I was about to ask the LLc with the sub chapter S seems the way to go.So lets say you make $100k and take $50k of salary and your expenses are $25k.That leaves $25k left over at yr end. Do you just take the $25k as a yearly distribution at year end and claim it as a dividend? So its taxed at dividend rates of 20% max with no social security taxes?Were are your business expenses during the year paid from the sub s or the llc?Does the insurance company pay commissions to your llc or subs?Are the commissions 1099'ed( most insurance co's don't 1099 corps) When buying E and O insurance do you list the llc or sub S?What name are credit cards for the business in?I would think just your name?

It all just depends. Obviously this isnt tax advice. But the expenses often would come out of the Salary and create your AGI (adjusted gross income). And anything declared as dividends avoids FICA.

Imo, it is best to have all commissions go into your business bank account. Expenses can be paid from that. If the carrier will not 1099 the llc then just use your name but have the EFT go to the business account. You need to list the LLC on your E&O if that is the business name you are operating under. Many E&O policies will just add on the llc name to existing e&o as long as its just you. It will just depend on the e&o carrier.

Credit cards can be in the LLCs name, but each individual card has the individuals name on it. There are "business" credit cards you can apply for as a business. Same with debit cards on your business bank account.

Again, not tax advice. Talk to a good CPA and they can help with the tax portion.

 

[goget]

Why would a carrier not 1099 your llc?I thought most carriers don't 1099 corporations and corporation deposits are basically there 1099 income?

 

[scagnt83]

Why would a carrier not 1099 your llc?I thought most carriers don't 1099 corporations and corporation deposits are basically there 1099 income?

You said they wouldnt, not me. I dont think that carriers make any distinction between a llc or an scorp. I certainly could be wrong though. Maybe someone who is set up as a true SCorp can chime in. I dont know why they would not 1099 an scorp...

 

[Nikita]

Re corporation vs sole prop: amount of personal income declared with FICA paid. My accountant pal says that lower income reported to Social Security means lower Social Security benefits at retirement. So, unless you are making up for that by chunking away very adequate private retirement savings, it's something to consider. I am not entertaining the "social security won't be there" line of thinking. Assume it will or won't be, but awake to the consequences of decisions.

My CPA told me that you do not gain much more in your Social Security account by contributing FICA much above the $30,000 income amount. She said this topic had been studied and written about. So apparently 30K is the magic number to aim for to minimize FICA without doing any damage to your future SS income.

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I'm a big fan of staying as an LLC and taking the subS election for taxes. Best of both worlds. Easier admin than a true SCorp and lower FICA than a LLC.

I talked to my accountant about this option but she didn't think it was possible to file taxes as a S corp unless you were actually an S Corp. She is a CPA and a partner in a well respected accounting firm. I'm really confused about all this now....

 

[sman]

My CPA told me that you do not gain much more in your Social Security account by contributing FICA much above the $30,000 income amount. She said this topic had been studied and written about. So apparently 30K is the magic number to aim for to minimize FICA without doing any damage to your future SS income. ---------- I talked to my accountant about this option but she didn't think it was possible to file taxes as a S corp unless you were actually an S Corp. She is a CPA and a partner in a well respected accounting firm. I'm really confused about all this now....

Your CPA is incorrect on both. The Social Security site has a benefit calculator. I recommend you go and play around with income figures. For example, I used a 1/1/65 DOB with a $30k income and retirement date of 1/1/2032. Monthly income would be $1,191. Using a $50k income would raise that to $1,664 per month. $70k is $2,110 per month and $100k is $2,442 per month.

I am set up as an LLC but file as an S Corp. This was at my CPA's recommendation. He has a large practice (multiple locations and about 40 employees). Been a CPA for about 25 years. I trust he knows what he's doing. I even had to make that election (file as an S Corp) at the time I set up the LLC. Again, your CPA is misinformed.

Edit: Maybe you can supply the following link to your CPA. Hopefully she'll trust what the IRS has to say regarding an LLC filing as an S Corp

http://www.irs.gov/Businesses/Small...ed/LLC-Filing-as-a-Corporation-or-Partnership

 

[Nikita]

Your CPA is incorrect on both. The Social Security site has a benefit calculator. I recommend you go and play around with income figures. For example, I used a 1/1/65 DOB with a $30k income and retirement date of 1/1/2032. Monthly income would be $1,191. Using a $50k income would raise that to $1,664 per month. $70k is $2,110 per month and $100k is $2,442 per month.

I am set up as an LLC but file as an S Corp. This was at my CPA's recommendation. He has a large practice (multiple locations and about 40 employees). Been a CPA for about 25 years. I trust he knows what he's doing. I even had to make that election (file as an S Corp) at the time I set up the LLC. Again, your CPA is misinformed.

Edit: Maybe you can supply the following link to your CPA. Hopefully she'll trust what the IRS has to say regarding an LLC filing as an S Corp

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/LLC-Filing-as-a-Corporation-or-Partnership

Thanks I will show her this tomorrow...

 

[scagnt83]

My CPA told me that you do not gain much more in your Social Security account by contributing FICA much above the $30,000 income amount. She said this topic had been studied and written about. So apparently 30K is the magic number to aim for to minimize FICA without doing any damage to your future SS income.

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I talked to my accountant about this option but she didn't think it was possible to file taxes as a S corp unless you were actually an S Corp. She is a CPA and a partner in a well respected accounting firm. I'm really confused about all this now....

You need a new CPA. She has no clue what she is talking about. This is accounting 101 stuff. Hell, a quick google search will bring up 5001 articles about taking the S election as a LLC.

Show her all the IRS pubs you want... you still need a new CPA if she doesnt know this already. Do clients bring you publications to educate you on how to sell insurance??


And she is wrong about the SS/FICA stuff too. I help people create a retirement income and SS planning is part of that. The high earners have much higher SS benefits than the low earners. I dont care what study she has read, real life experience says otherwise.

 

[sman]

Thanks I will show her this tomorrow...

To be honest, I'd question anything she told me at this point. I'm not a CPA, but the filing as S Corp should be common knowledge for a CPA.

And she definitely shouldn't be giving advice on social security considering she said there wasn't much benefit after $30k of income.