llc and tax advantages
what are the advantages of switching from a sole proprietor to an s corp.
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I use LLC taxed as an S corp. Depending on one's operation and net profit, it can really be a tax saver. I would not go straight to S corp, as there is a lot more regulatory hoops to jump thru and depending on state, more than likely you would also have to pay unemployment insurance on yourself as an employee of the corp.
A LLC, filing as an S corp, is the best of both worlds. You have the limited liability protection of a corporation, and you are not required to hold regular board meetings and document meeting minutes as you would would with an S or C corp. You pay yourself a reasonable salary, based on average driver annual income for your area, and you pay income and SSI on that. Any other profit the LLC has, is distributed to you as income also, but it is only subject to income tax and not SSI or self employment tax.
For instance, say the prevailing driver annual income for your area is $40K. You would pay yourself that amount, roughly $770 a week. You pay income and SSI on that. The business however, nets another $40K in the year. You receive distribution of that and pay income tax on it, but you do not pay SSI on it. Saving about $6200. If you are sole proprietor or LLC using sole proprietor taxation status, you would have to pay that additional SSI amount, as all income from the business would be subject to both income and self employment (SSI) tax.
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