Which one would you recommend a LLC or S-Crop for Tax saving?

Dark Knight · Sep 19, 2012

Hey Guys,
I know most of BHWer has LLC or S-Crop, both of them are good. But as I live in NY, which one would recommend and why?
I done some research but seems both of thm has some problem with the state, weird right but this is true.

LLC Taxes:-

In the eyes of the federal government, an LLC is not a separate tax entity, so the business itself is not taxed. Instead, all federal income taxes are passed on to the LLC's members and are paid through their personal income tax. While the federal government does not tax income on an LLC, some states do, so check with your state's income tax agency.

S Corporation:-

Some states (like New York and New Jersey) tax both the S corps profits and the shareholder's proportional shares of the profits.

Your help would be appreciated

ja1myn · Sep 19, 2012

Are you in NYS or NYC?

I am from NY as well so I know all about that. Your best bet is to talk to a financial adviser or accountant; that's what I did. Each different corp has their own set of parameters written in the law, so you have to talk in depth with your accountant to discuss what would be best for your interests and needs.

cybersage · Sep 19, 2012

You should talk to an expert in your own state.

One reason to elect S-corp taxation over sole-proprietor/partnership taxation is to avoid paying self employment taxes quarterly on net earnings; you can elect S-corp taxation with an LLC (this allows you to take advantage of relaxed corporate formalities inherent with an LLC, along with tax advantages that an S-corp offer). You may have an increased accounting expense, but paying yourself through wages (and thus incurring payroll taxes) may be better than paying self employment taxes (this is relative based on your income). Generally an S-corp election will give the owner more flexibility to make decisions to minimize tax liability.

In a nutshell, and again I suggest you consult an expert in your area, but a good option is an LLC that elects S-corp taxation. It is the best of both worlds and gives you tax planning flexibility, but may cost a little more in accounting/administration.

Dark Knight · Sep 19, 2012

ja1myn said:
Are you in NYS or NYC?

I am from NY as well so I know all about that. Your best bet is to talk to a financial adviser or accountant; that's what I did. Each different corp has their own set of parameters written in the law, so you have to talk in depth with your accountant to discuss what would be best for your interests and needs.

Hey I am in NYC, but what would you recommend

cybersage said:
You should talk to an expert in your own state.

One reason to elect S-corp taxation over sole-proprietor/partnership taxation is to avoid paying self employment taxes quarterly on net earnings; you can elect S-corp taxation with an LLC (this allows you to take advantage of relaxed corporate formalities inherent with an LLC, along with tax advantages that an S-corp offer). You may have an increased accounting expense, but paying yourself through wages (and thus incurring payroll taxes) may be better than paying self employment taxes (this is relative based on your income). Generally an S-corp election will give the owner more flexibility to make decisions to minimize tax liability.

In a nutshell, and again I suggest you consult an expert in your area, but a good option is an LLC that elects S-corp taxation. It is the best of both worlds and gives you tax planning flexibility, but may cost a little more in accounting/administration.

Thanks for your details, yeah I am going to talk to an accountant this week. I know it would cost a little bit extra but it would reduced more thn that. So it won't be a problem at all.

Zapdos · Sep 19, 2012

As above, talk to a legally certified accountant for your state. They know the law better than most randoms will on a forum. Infact, having an accountant will save you time and money so figuring out taxes is a good first step to a good relationship with your accountant.

Though to answer your question, an LLC if I recall can opt for taxing and income based on LLC, S-corp, or corp laws. Lots of flexibility. Using an LLC is also apparently much easier for paperwork compared to S-Corp.

Which one would you recommend a LLC or S-Crop for Tax saving?

Dark Knight

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ja1myn

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cybersage

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Dark Knight

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Zapdos

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