- 7,790
Geez, Paul, I thought that was your mug shot! I thought you are very photogenic.
Taxes and being 1099
- Thread starter midwestbroker
- Start date
I formed an S-corp back in the 70's. Poor decision. Company is now dead, and good riddance! Quite a bit of regulations for no or little advantage. Would not recommend it to anyone.
I think LLC is the way to go if you are in the bucks. Newbies in the business will be better off as sole proprietor until then.
- 1,641
Think of S-corp as a tax treatment. If you are unhappy with the s-corp treatment, you may unelect it. However, once you unelect you must wait five years to switch back. Your two basic structures (not including partnerships) are:
Sole Proprietor, or single member llc. (IRS treats llc as sole prop for tax purposes)
Use schedule C. You pay SS on first $102,000 and Medicare tax on all income. As a sole prop you are responsible for 15.3% ss and medicare. Expect to pay employment taxes and income taxes on all income.
C Corp.
File form 1120. The corporation pays you a salary. Up to $102,000 you will pay 7.65% ss and medicare. The corp will match it and write off its portion as a payroll expense. Any profit the corp has after business expenses and paying you is subject to corp taxes - 15% on the first $50k. If you take dividends, you will pay capital gains rate, thus the concept of double taxation.
S-Corp. (may be used for llc or corp)
File for 1120S. Similar to C corp, except you are taxed as though all profits were taken from the corp. Typically no corp tax. Divedend (called distribution) is taxed at your income tax rate.
Advantage of s-corp over sole prop: As long as you take reasonable salary, you can avoid employment taxes on a portion of income.
Advantage of s-corp over C corp: No double taxation on distribution.
Advantage of C corp over s-corp: When you are throwing off so much cash you can leave it in the corp and let the corp (which has a lower tax bracket than you) make investments.
Advantage of llc over corp: less paperwork for a struggling business. Easier to shut down.
Sole Proprietor, or single member llc. (IRS treats llc as sole prop for tax purposes)
Use schedule C. You pay SS on first $102,000 and Medicare tax on all income. As a sole prop you are responsible for 15.3% ss and medicare. Expect to pay employment taxes and income taxes on all income.
C Corp.
File form 1120. The corporation pays you a salary. Up to $102,000 you will pay 7.65% ss and medicare. The corp will match it and write off its portion as a payroll expense. Any profit the corp has after business expenses and paying you is subject to corp taxes - 15% on the first $50k. If you take dividends, you will pay capital gains rate, thus the concept of double taxation.
S-Corp. (may be used for llc or corp)
File for 1120S. Similar to C corp, except you are taxed as though all profits were taken from the corp. Typically no corp tax. Divedend (called distribution) is taxed at your income tax rate.
Advantage of s-corp over sole prop: As long as you take reasonable salary, you can avoid employment taxes on a portion of income.
Advantage of s-corp over C corp: No double taxation on distribution.
Advantage of C corp over s-corp: When you are throwing off so much cash you can leave it in the corp and let the corp (which has a lower tax bracket than you) make investments.
Advantage of llc over corp: less paperwork for a struggling business. Easier to shut down.
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- 3,863
Everyone is talking taxes and not talking about one of the biggest reasons to form a company - "PROTECTION OF PERSONAL ASSETS". In the Insurance business I think operating sole or "S corp" is entirely too much liability (my opinion). You think your E&O policy will save the day? Think again, remember E&O is an insurance policy (and we all know that game...).
There are other things to consider as well - if you want your LLC or INC to be paid commissions you will need to get it LICENSED in every state you operate. Depending on the state this can be FREE to several thousand dollars since you need to get the company APPOINTED as well.
There is a lot to consider, but at the end of the day I will take PROTECTION over tax consequences any day. Fortunately I live in Texas so my House, Cars (up to two), One Horse, Two Donkeys, Two Chickens, And A Cow are all protected under Homested laws even if I was not a company - but I still don't chance it.
There are other things to consider as well - if you want your LLC or INC to be paid commissions you will need to get it LICENSED in every state you operate. Depending on the state this can be FREE to several thousand dollars since you need to get the company APPOINTED as well.
There is a lot to consider, but at the end of the day I will take PROTECTION over tax consequences any day. Fortunately I live in Texas so my House, Cars (up to two), One Horse, Two Donkeys, Two Chickens, And A Cow are all protected under Homested laws even if I was not a company - but I still don't chance it.
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Hey, y'know what? Everybody needs ppl!
- Thread starter
- #17
- 2,370
Oh yea...If I do pre-paid legal they can send a letter to the IRS to leave me alone.
I think I will just go that route.
I am leaning to LLC for tax and protection and what ever other benefits come my way. I am still getting my tax info ready and then off to see my tax guru.
Thanks for your help.
I think I will just go that route.
I am leaning to LLC for tax and protection and what ever other benefits come my way. I am still getting my tax info ready and then off to see my tax guru.
Thanks for your help.
- 3,863
Most agents started as sole proprietor until they made some change, then they formed LLC or INC. I do not know a lot of agents that started with LLC or other unless they bought into a franchise type scenario.
You will have to get all state licenses and re do your appointments with a company being licensed, it is a pain - years later we are still sorting out the mess, but it had to be done in my opinion.
You will have to get all state licenses and re do your appointments with a company being licensed, it is a pain - years later we are still sorting out the mess, but it had to be done in my opinion.
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