LLC 15% pass through vs Sole Proprietorship 20% passthrough

[bluediamond]

I have not set up an LLC with S-Corp - all I have is S-Corp. I'm really not sure what the benefit of the LLC would be...

I can tell you this - a reasonable salary for an insurance agent is not astronomical - many agents don't earn a lot. My first year as an s-corp my "salary" was around $30k. It's gone up a "reasonable" amount each year.

But if you aren't new - let's say you pay yourself $60k-80k salary as you have experience. That's the W2 wage. But, you're profitable, the S-Corp makes some cash, you have some expenses, some future marketing to pay for in business savings, and then leftover - which you distribute to yourself by writing yourself a distribution check. No taxes taken out.

I've heard some people distribute more than their salary. I don't do that, I may be too conservative, but it is what it is.

I agree on that the CPA earns more when we do this - mine runs my payroll monthly for myself and my wife (ahem, administrative assistant) and they do everything for the local taxes for us so we don't have to do a thing.

I just think that the distribution - and payroll savings - is where the real value is. I've heard that the s-corp is not a good idea compared to sole-prop when the revenue is under 100k. Over 100k, it is a good idea. But that's just a rule of thumb someone gave me a few years ago.

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As far as payroll and social security benefits - it's not something I've factored in. I'm 34 and I'm not really banking on SS - I want the most $ now - your situation and age may make it more of a factor? I don't really know.

Thanks for your insight. I am 71 and drawing social and the past couple years plus this one will raise it substantially. Since of my age and much thought I am remaining a sole proprietor, yep I know many people set up LLC or S Corps my age and older but nothing is guaranteed in this business as far as I'm concerned.

 

[XpressInsurance]

If you set up as LLC or S Corp, I believe you will also have to have your carrier appointments set up that way. I don't know how many of you do business in a lot of states but that can get costly for company licenses vs. individual state licenses.

 

[Todd King]

If you set up as LLC or S Corp, I believe you will also have to have your carrier appointments set up that way. I don't know how many of you do business in a lot of states but that can get costly for company licenses vs. individual state licenses.

Actually, you can set up an LLC and still have all of your contracts in your individual name. Of course, that means, for many companies, you will still have to have a personal account for them to pay to, not a business account. That's okay because you can set up your own business account and just transfer the money there. That way you can keep all things business separate from your personal.

 

[sshafran]

Actually, you can set up an LLC and still have all of your contracts in your individual name. Of course, that means, for many companies, you will still have to have a personal account for them to pay to, not a business account. That's okay because you can set up your own business account and just transfer the money there. That way you can keep all things business separate from your personal.

But then they 1099 your ssn, not your tin.... doesn't seem like this would be the best way to do things.

I could be wrong...

 

[Todd King]

But then they 1099 your ssn, not your tin.... doesn't seem like this would be the best way to do things.

I could be wrong...

Yes, but it is an LLC, so it's cash in, cash out.

 

[fun2drum]

I'm trying my best to wrap my mind around this. Is there really any advantage to LLC/S corp vs sole proprietorship all things considered? Passthrough is 20% and it looks like with any business it generates the self employment tax still applies. Maybe it makes more sense if you're an agency with a downline? That way the agency is paid to the LLC so if a downline agent gets into trouble the LLC gives a layer of protection? Am I reading this right?