Need some tax advice...

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paycoguy

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Aug 9, 2006
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...cuz I can't get decent tax advice in the real world.

Ok I live in California and have an LLC. I've been making a boat load of cash and it's been going into the LLC. I just found out that the LLC doesn't save me any taxes...cuz it wasn't classfied to be taxed as an s-corp.

I talked to a tax attorney and he didn't believe my income and said that if I did make that much that the s-corp will not protect me because the business is run by only one person. He also just told me to max out my 401k, IRA, make donations...crap like that. Fucking idiot.

Anyways, I think the route is to go get an s-corp, pay myself a salary, and have the money in the s-corp taxed at 15%.

Does that sound right?

What you y'all do?
 


From my understanding, in California I think it roughly comes out to be 38% in taxes. You have the part right about paying yourself a salary then you get taxed whatever. But the thing that gets you is you have to pay double social security, medicare, federal, state, etc because if you were hired by an employer they would be paying the other % of all those. Since you are pretty much self-employed you have to cover those costs. Also an S-Corp might not be the best way to go, all depends how much you are making. Get an appointment with your local CPA and go over all these things then decide which would be the best route to go from there.
 
i've been panicking about this same thing. I've started making a mint and don't wanna get tax-slapped. best thing is go see a CPA as soon as fucking possible. i have an appt for Tuesday of next week.

He told me that I don't have to incorporate to write things off unless I wanted to be able to separate entities in case of lawsuits, etc. Or if I wanted to 'hire myself' as an employee and then if business went bad I could literally 'fire myself' and collect unemployment from the state.

you have options to keep more of your money but either way you're going to get hammered come tax time. I've always heard to just put aside 50% of everything you make so that you're safe when the tax man cometh.

fucking blows though, i'd rather evade the shit out of it.
 
Also I forgot to mention that with an S-Corp you it is around $800 a year in order to renew it. For the first year they waive it, then after that you have to start paying. Just look as it as a write off :D
 
we talked to one in another state about this, thinking the same thing as you are. anyways, one 300 dollar bill later, he told us an s-corp would make no difference. we are currently an llc. so maybe s-corps are overrated. who knows.
 
U guys have to starting doing what the Big Corporation do. Send all ur money overseas and take out loans so u can repay those back in x amount of years and pay No tax's or very little.
 
paycoguy said:
...cuz I can't get decent tax advice in the real world.

Ok I live in California and have an LLC. I've been making a boat load of cash and it's been going into the LLC. I just found out that the LLC doesn't save me any taxes...cuz it wasn't classfied to be taxed as an s-corp.

I talked to a tax attorney and he didn't believe my income and said that if I did make that much that the s-corp will not protect me because the business is run by only one person. He also just told me to max out my 401k, IRA, make donations...crap like that. Fucking idiot.

Anyways, I think the route is to go get an s-corp, pay myself a salary, and have the money in the s-corp taxed at 15%.

Does that sound right?

What you y'all do?
Click to expand...

sounds like you need a new acct.

yes, set up an S Corp. you pay yourself a reasonable salary, say $50K a year.

then the rest of your profits you want to take you are done as a dividend. the benefit there is there are no payroll or SS taxes on the dividend, just capital gain taxes which are lower.

i seem to remember my acct said if you made $100K in a year, if you did the S Corp you would save around $5K a year doing it the way above.
 
If you make in the neighborhood of 100k or less a year, an S-corp will save you taxes. If you make a lot more than that, it won't.

That's because if you are banking say 300k/year, it's not reasonable to give yourself a 50k salary.

Self-employment tax is mostly composed of social security tax, which maxes out at about 100k. So if your salary is that or higher, all you're paying is medicare above that, which is not that much. In addition, that savings is roughly offset by having to pay a 1.5% franchise tax in California.

Factor in that your taxes will be much more complicated (expensive) and having an S-corp may actually end up costing you money versus being a sole proprietor. You're also far more likely to be audited, since the IRS knows that a lot of people with S corps assign too little profit to salary.
 
pharmhand said:
If you make in the neighborhood of 100k or less a year, an S-corp will save you taxes. If you make a lot more than that, it won't.

That's because if you are banking say 300k/year, it's not reasonable to give yourself a 50k salary.

Self-employment tax is mostly composed of social security tax, which maxes out at about 100k. So if your salary is that or higher, all you're paying is medicare above that, which is not that much. In addition, that savings is roughly offset by having to pay a 1.5% franchise tax in California.

Factor in that your taxes will be much more complicated (expensive) and having an S-corp may actually end up costing you money versus being a sole proprietor. You're also far more likely to be audited, since the IRS knows that a lot of people with S corps assign too little profit to salary.
Click to expand...

lets just say there is no $ difference in taxes....i think the liability protection of the s-corp versus sole prop makes it worth it.

maybe pay your acct. to run some scenarios with various income levels to see what you would owe. kind of like spit-testing but with taxes. my guy has run scenarios for me before when warranted.
 
Yeah, assuming OP wants to keep that protection, he could keep his LLC or get an S corp instead. I was just pointing out that he shouldn't assume that it will save him money if he gets an S corp. It depends on a number of things.
 
You can have an LLC and elect to have it taxed as an S-Corp would.
 
In our business there's no where to hide really. Buy a house and that's about it. We don't have inventory, buildings, trucks, etc etc. There's no where to hide honestly. Yeah you can move stuff overseas but honestly if you get caught you'll end up much worse off then you started. Offshoring makes sense to protect wealth but as a tax shelter, good luck.
 
I know paying taxes sucks, but the alternative is worse. Taxes are a sign of success.

The only other thing I would recommend is to use the money to buy experiences. Travel a bunch to conferences, get great season tickets to your favorite teams, dine out a bit, and bring a friend that will do business with you in some way so you can write it off.

The funny thing is that when you do these things you end up being with other successful people and new opportunities arise and you end up earning more.
 
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