WHAT ARE YOU?
I am an S Corp. and I love it! All the advantages of a Corp. without the Corporate level taxes! I love keeping my salary low, low, low, and then getting way more for my dollar when I dividend myself.
Yep, S-Corp here too. It’s generally the way to go for this type of business.
Where’s the LLC spot on the poll? It works good for us.
S corps can sometimes save self-employment taxes versus an LLC or sole proprietorship. (By the way, S corps don’t pay dividends, only C corps do that; you probably mean “profit distributions”, which as you correctly point out, are not subject to self-employment [payroll] taxes.)
The caution I would add is that no one entity is the right choice for an entire category of business (e.g., pizza restaurants) - it depends on the facts and cirucumstances of each individual situation.
For example, C corporation double taxation can often be avoided by proper tax planning, neutralizing this disadvantage of C corp status. C corps also have advantages in allowing the use of a fiscal year instead of calendar year and shareholder benefits programs.
Hope this helps.
I had the same question earlier this week and met with a CPA. We went over the LLC and the S Corp. The S-Corp made more sense from a tax liability situation and advoiding the “double” taxiation with a LLC.
He actually showed me tax returns from a client that was a LLC and then the same taxes if they have been an S-Corp. The difference in this case was they paid $10,000 more being an LLC. I guess the client quickly swithced CPA’s.
I think the double taxation cones from the s-corp not the LLC. If I’m wrong here let me know and I’ll fire my CPA ASAP.
The double taxation issue arises when you are a C-Corp, not S-Corp.
LLC and S-Corp are the same when it comes to taxes - both are “pass-through” entities.
When we researched our formation, we found that LLC was created as a opportunity to capitalize on tax benefits of S Corp without the incorporation structure and requirements. You can find the benefits and drawbacks of LLC in wikipedia at
http://en.wikipedia.org/wiki/Limited_liability_company
An LLC can elect to be taxed as a sole proprietor, partnership, S-corp or corporation, providing much flexibility. One of the hugest benefits for small companies is the “pass through” taxation similar to S Corp, and bypassing the double taxation . . . . unless you elect with the IRS to be taxed as a Corporation instead of a partnership.
It is complex, and we had an attorney and accountant giving us guidance and information for us to make our decision. Yours may be off base if he/she said that LLC would pay more tax just for being and LLC as opposed to S Corp . . . or we may not have enough of the picture to tell what your complex financial situation is. MY setup is REALLY simple, and LLC makes sense for me for the protection and the tax benefit of my personal situation.