As a CPA, Kristin is asked many questions about how small business owners should deal with money and tax issues for small businesses. There is one question that she is asked to most.
Well, as with most questions involving the government and taxes it is never quite that simple.
The common options:
There are many reasons to pick any of these selections. However, the first thing you need to understand is an LLC is considered a disregarded entity for tax purposes. That means that if you have one owner, your business will be treated as a sole proprietorship by default. Have two or more owners? Your LLC will be a partnership by default. You can elect that your LLC be treated as an S Corp as well. If you ever decide to move your sole proprietorship or partnership to an S Corp you will save yourself paperwork if you become an LLC.
The time you should really consider paying a bit more to set up your S Corp is when your compensation equals the reasonable salary to replace you in the business, including an additional amount for your management function. The best place to learn your reasonable salary is Salary.com.
You will need a payroll service like Gusto, plus pay for unemployment taxes and additional tax filings. Email Kristin@SmallBizLife.com to get set up in Gusto today.
There are more considerations in the process. Check out the episode to get all the financial impacts for free. It is also a good idea to discuss the legal implications with an attorney. We are not lawyers and do not offer legal advice in this episode.
If you would like to set up a call or a video call to get Kristin's help with your situation create an appointment with Kristin today.
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