Is an LLC Necessary?

[walthamny]

And if 95% of final expense agents fail, wouldn't a reasonable salary be rather low?[/QUOTE]

Well, being a life insurance agent has low educational requirements. They are not going to let you claim more than 50K for a job that in most cases requires just a high school diploma. It is a job that has low entry barriers. The failure rate is not that relevant for IRS because it is open to subjective values. It will get abused all the time if they allowed the failure rate into that calculation.

 

[Thad.Sipple]

As DHK says, just my thoughts and not to be taken as legal advice. I am a "C" corp, and as such, it does save tremendously on taxes.

I am confused isn't that opposite of what DHK said?

 

[DHK]

I think he only meant his first sentence - to not take his post as legal advice.

 

[Thad.Sipple]

By taking a W-2 wage (which you cannot do if you're an LLC single party) and then taking a drawl doesn't ultimately save you money.

The numbers my CPA And I ran doesn't necessarily change my tax bill. Self-employment tax makes up the difference that I think I save on the other end. Remember whether it's coming from the corporation or not it's still all your money.

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As DHK says, just my thoughts and not to be taken as legal advice. I am a "C" corp, and as such, it does save tremendously on taxes.

Well if it does great, not sure how it could, all monies get taxed in one form or another. At some point you pay. Keep it in the corp (C Corp) then the Corp pays the taxes and it could be double taxed, if your losing money or have the write offs you would save tax money as a sole proprietor too, but not have to pay more to a CPA to file fore you and Corp yearly fees.

Anyway if your saving that is awesome, but my guys run my taxes this way that way and every other way to determine what's next and I may save a few thousand here or there, but I make it up with Corp fees and CPA fees, it's not 10's of thousand.

Just opinions on my situation. Maybe I make too much but not enough to find more savings.

 

[tek4425]

Thanks for the info everyone. I was just thinking of this for the purpose of reducing taxes.

 

[sirherbie]

So what's the downside of a llc with sub s election? You make a 100k and take $40 k salary and $60k in dividends. You save around $9k of ss taxes . Weres the downside?

 

[Thad.Sipple]

So what's the downside of a llc with sub s election? You make a 100k and take $40 k salary and $60k in dividends. You save around $9k of ss taxes . Weres the downside?

How much does your LLC pay in taxes on behalf of your 40k?

How much are the self employment tax on the 60k?

How much did you pay extra to file as LLC etc.

I'm not saying there is some benefit but it ain't much.

Remember it's all your money so if it gets taxed on the front end it back end its still your money.

 

[HoosierLife]

So what's the downside of a llc with sub s election? You make a 100k and take $40 k salary and $60k in dividends. You save around $9k of ss taxes . Weres the downside?

This is exactly what my accountant is telling me. My taxes only run around $200 a year with this guy. He says I will be charged around $1200-$1500 to file LLC with a S Corp election, depending on how many checks I have to write to myself during the year.

Spend a $1000 to save SS on all the dividends seems like the right play to me.

I just don't know how much to take in salary. He seems to think 20% is enough. But it's not his rear in the fire if I get audited.

 

[Thad.Sipple]

Maybe the math will be easier to see. Granted all my numbers are for CA so in other states it will be a little less.

100K is my example half W-2 half Draw. (half is what I have been told for years it the fair number) it is not about what is reasonable based on everyone else it is reasonable based on what you make. Example if I gross 300K does it make any logical sense that I could pay myself 35K because the rest are weak? the IRS will laugh at me, along with that lets say i am weak and Gross 25K, so how much should I W-2 me?

50K W-2 - the Employer (you) will pay approx $5k in taxes, fees etc.
50K W-2 - Employee (you) will pay approx $9K in taxes, fees etc. Same (50K but both employee and empoyer have to pay taxes.

50K Draw - assuming you can right half the monies off
25K Net - Self Employment Tax - $3500


Assuming you can right off more lets say you net $12K then you owe approx $2k as we all know this number will probably be a little higher but this is just for fun.

Also remember on the Employee side (the 9K) you will probably get a refund of about 30% maybe more or less.

Pay your self a draw of 100k and Net 25K you owe $3500 in Self Employment tax.

Don't forget fees to file, fees to have the LLC or Corp etc.

Like I have said in the past if you are in the 1% and / or have employees then get a Corp.

Otherwise being a sole proprietor is fine.

 

[sirherbie]

Not understanding your #'s Thad.
$100k net all self employed ($100k x $15.2% fica =$15,200 . After 1/2 fica writeoff its like 13.2% so $13,200)

$100k llc/sub-s $50k w-2 and $50k dividends. $50k w-2 about $7600 fica and
$50k dividends 0 fica = $7600 total. About $1500 in accounting extra c
osts. Still about $4100 in fica savings.

The questions is don't I have to get licensed in all my states both as a resident and nonresident as a corp? If you have a ton of co's that's a pain in but. Also remember but not paying 1/2 your fica you would pay as an individual your ss payout will be much much less. It could be as much as $1000 a month less.