Which is better for taxes: LLC or S corporation
By: Barry E. Haimo, Esq.
December, 13, 2013
It goes without saying that you want to form the most appropriate business entity for your business, legal, tax and accounting needs. Tax is just one consideration. There are multiple options: LLCs, LPs, LLPs, LLLPs, Corporations, S-Corporations, General Partnerships, etc. Yes, there are certain advantages to forming a corporation and electing to be treated as a small business corporation (S-corporation). One of the benefits is slightly lower taxes. It comes in the form of savings on self-employment taxes and the withholdings that come along with it. The specifics will be discussed in a later post. Suffice it to say that both entities are subject to income tax on 100% of the profits. However, self-employment taxes and withholdings are taken from the “reasonable” salary of employees of an S-corporation, whereas all profits are subject to self-employment tax and withholdings in an LLCs However, there are also major disadvantages – such as losing control and/or ownership of the entity itself. It’s up to you to understand these advantages and disadvantages and make a decision that best suits your particular needs.
Sadly, in their enthusiasm to get started, many founders proceed blindly. They forget to get sound advice before jumping into a particular business entity. We live in a wonderfully evolving world of technology. However, just because you can easily do something yourself quickly and cost effectively does not mean you should. We are all guilty of proceeding blindly and not knowing what we don’t know. If you disagree, I simply challenge you to sit down with one or two estate and business planning attorneys prior to forming to make an objective conclusion for yourself. Our clients are thankful we advise them beforehand, and grateful when we clean up the mess that occurs afterwards.
We are diligent and dependable, compassionate and personable and innovative and professional. Haimo Law (HaimoLaw.com) helps you protect your family and your business’s interests for the immediate and long-term future. Together, we can take advantage of incredible tools and techniques that are available to you right now. Call us for wills, trusts, probate, asset protection and business planning. Haimo Law offers premium legal representation at an affordable price and customer service you will not find elsewhere. We are reliable, approachable, honest and attentive. Helping your family and business is our priority.
Author:
Barry E. Haimo, Esq.
Haimo Law
Strategic Planning With Purpose
Email: barry@haimolaw.com
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