I at the present a sole proprietorship. Afriend of mine became an S corp., reason being is that it eases your tax burden. Anyone have any feedback on this.
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See your accountant.
The main reason for incorporating is not the tax benefit. Anything that you can deduct for (car, tools, gas, computer etc) as a corporation, can also be deducted by a person.
The main reason for incorporating is limited liability.
Boris
"Sir, I may be drunk, but you're crazy, and I'll be sober tomorrow" -- WC Fields, "Its a Gift" 1927
One new plus is that under the Economic Growth and Tax Relief Reconciliation Act of 2001, self-employed incorporated people can now contribute up to 25% of their earned incomes to a SEP-IRA, versus just 15% in the past. Unincorporated self-employed folks are limited to a little over 18% now. I've been frustrated with the 15% up to now. I'm worried about retirement income, especially with the recent performance of my SEP account. I want to contribute the max, and the new max is better.
Greg.
Greg,
Excuse my ignorance on this topic but if you are an S-corp can't you pay yourself as an employee , withholding and such. Any profit above your salary would then be tax exempt. I must admit my thinking is a bit cloudy on this. one of the G.C.'s I work for is an S-corp but his wife does all the bookkeeping so he is not really sure.
if you have an S-corp, you must pay yourself a reasonable salary / rate..
any profits to the corp. become the shareholder's regular incomeMike Smith Rhode Island : Design / Build / Repair / Restore
"If you have an S-corp, you must pay yourself a reasonable salary / rate.. any profits to the corp. become the shareholder's regular income"
To make it clearer. You still pay the same income taxes. But you are save the SS taxes on the amount that is a dividend. But at the same time your reduce your salary and thus the amount that you can contribute to a retirement plans (unless you are already maxed out).
I choose to salary myself up to the limit for Social Security withholding. Anything more is a bonus. I do have to be able to stand the "acid test" on a reasonable salary, and, with what I do, this is it.
My feeling on the retirement contribution is that the only person that will take care of the old man that you will become is the younger man that you are today.
I really don't know of a site that will help you with S-Corp questions. I learned a lot by the seat of my pants, like I do everything else, now that I think about it !
Greg.
Going S corp cut my taxes in half from sole proprietorship... but then I had to pay my accountant, check that out It's okay, I can fix it!
Presently don't have an accountant but would be willing to pay for one and become an S-corp if it cut my taxes in half.
Are there any advantages with an S corp as far as deducting health insurance or is it just C corps that get the full deduction? And would know of any good online sources of S corp info- I'd like to research it further before I talk to accountant/lawyer. Thanks
I too am a s corp but I am still considered a llc how the accountatn worked that one is beyond me and I'd rather leave it there. To answer your question there are tax bennys but you still pay self employment tax usually... so it's a small break non the less a break.
I became an S-Corp in Jan of this year for 2 reasons:
1) Limited liability
2) Reduced taxes
I keep all of my books (will get either a bookkeeper or acct. to handle my year end taxes), pay lower taxes and spend ~20-30 minutes per day on tax/paperwork related items. I incorporated my self (4 hours of time and $100.) w/o any problems.
I think it is worth the effort to become incorporated. You have to keep up w/ taxes which, if you do it yourself, will at first seem overwhelming but after 1 quarter it becomes routine.
Goo luck!
dlb