My apologies...I'm not sure which forum to post this question. I would like to know if anyone has set up an S Corporation to run their business through and any opinions on whether this is a good idea. I have talked to several CPAs and attorneys who say you can save thousands of dollars in FICA by doing this. It costs about $300 to set it up.
Any Opinions on Setting Up an S Corporation?
- Thread starter Nikita
- Start date
Well.... they're the right ones to ask
I have set up an S Corp and most all new carriers now pay it. I still have one stubborn old one which won't switch over....
It works - but sometimes I wonder if the accounting fees eat up all my tax savings!
It's possible to save a decent amount on FICA taxes by doing this. Just depends on your income. The concept is paying yourself a salary along with distributions. The distributions do not currently require FICA taxes. Keep in mind, if your salary exceeds the income limit which requires FICA, the savings isn't that much.
The other thing to consider is the ongoing expense of having the S Corp. for example, you will now have to have a corporate return done. You'd likely have to pay someone to file your quarterly reports. I pay $1,400 for my annual return and quarterly filings.
Lastly, most carriers will require your S Corp to be licensed as well if that is who they will pay commissions to. This isn't a big deal, but it is additional work and expense. Not to mention having to complete contracting paperwork for all those carriers too. I think that was the biggest pain in the arse for me personally.
I'm not pro or con, but other factors to consider:
1. E&O cost for the corporation vs sole proprietor
2. CPA expenses (this has already been mentioned)
3. Banking costs
I've had 3 CPA's all tell me the same thing: until you are actually paying taxes (defined as more than $5K), stay a sole proprietor. When you hit $5K to the IRS, its time to deal with the corporation issue.
1. E&O cost for the corporation vs sole proprietor
2. CPA expenses (this has already been mentioned)
3. Banking costs
I've had 3 CPA's all tell me the same thing: until you are actually paying taxes (defined as more than $5K), stay a sole proprietor. When you hit $5K to the IRS, its time to deal with the corporation issue.
My E&O is the same cost. It lists both my agency and me as the insured.
- 1,453
I am of the understanding that an S corp helps me more than an LLC because I am not married.
I only have to have E&O once. and it is a bit more tedious went doing appointment paperwork for each company.
I only have to have E&O once. and it is a bit more tedious went doing appointment paperwork for each company.
- 948
I moved from sole proprietor to s corp to reduce exposure to self employment tax. Saved about $6000 a year. Worth doing. Just my opinion .
You don't have to go through the hassle/expense of getting your business licensed. If the carriers won't pay your company business acct directly (as some won't), just have them pay it to a personal bank acct (they are paying you). Set one up that you use to accept commissions, then transfer them over to your business acct the day after they land. Very simple and clean, easy to track. I've had an S-corp for 7yrs. Perfect fit for me. Certainly pro's/con's to every type. A good accountant helps too. I spend about $100/mo total for bookkeeping, taxes, quarterly repts, etc.
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