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Old 02-16-2008, 09:06 AM   #21
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Quote:
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I would look into an LLC
I agree
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Old 02-16-2008, 10:09 AM   #22
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My acct explained the differences to me last year. There were several benefits to being a S corp. I can't remember them all, the biggie was paying yourself as an employee on a W2 avoids the 7.5% self employment tax.
I know when we reviewed our taxes for last year, I was able to deduct more than the previous year as a GP. For example, instead of the mileage allowance, I was able to write off all gas, repairs, improvements, etc. on vehicles. Plus you can get a corporate rate on hotels! I am meeting with a health insurance provider on Monday, I am hoping as a corp that I can afford insurance.
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Old 02-16-2008, 11:06 AM   #23
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paying yourself as an employee on a W2 avoids the 7.5% self employment tax.
Well not exactly. As an employee, you are having 7.65% deducted from your pay, but your employer (you) also kicks in an equal amount. Your still paying in just as much, it's just not called "self employment tax" anymore.
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Old 02-16-2008, 01:42 PM   #24
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But as an S-Corp, the portion that you take as dividends is not subject to social security tax and medicare. From what I understand, there is a way to structure an LLC this way also, but I still have to look into it. I am still a sole proprietor, just need to decide when I want to go through the hassle of switching all the paperwork over.
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Old 02-16-2008, 01:53 PM   #25
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But as an S-Corp, the portion that you take as dividends is not subject to social security tax and medicare. From what I understand, there is a way to structure an LLC this way also, but I still have to look into it. I am still a sole proprietor, just need to decide when I want to go through the hassle of switching all the paperwork over.
So then you could pay yourself minimum wage, paying SS only on that amount and take the rest as a dividend untaxed?
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Old 02-16-2008, 02:02 PM   #26
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There are still income taxes of some kind on the dividend, but you do not have FICA to worry about. How you split it between wages and profit/dividend should be discussed with your accountant. The split is one of those gray areas where I would not want to draw the IRS's attention by trying to take advantage of the system. I would say pay yourself what you would pay an equivalently skilled employee for the field work and then take as dividend for profit, non-billable work, sales, etc. Again, I am not a lawyer or accountant and I have only just started to look into this stuff. Consult a professional.

One other thing, if you pay yourself a wage through an LLC or S-Corp, I do not know how it would work for WC insurance, if you still can exclude yourself or not.
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Old 02-16-2008, 02:27 PM   #27
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One other thing, if you pay yourself a wage through an LLC or S-Corp, I do not know how it would work for WC insurance, if you still can exclude yourself or not.
Then there's unemployment insurance too.
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Old 02-16-2008, 02:59 PM   #28
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Then there's unemployment insurance too.
So, does this mean I can fire myself? SWEET!
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Old 02-16-2008, 05:29 PM   #29
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So, does this mean I can fire myself? SWEET!
If you did, I'd suggest you contest it. That way you would win either way.

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Old 02-16-2008, 06:14 PM   #30
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Originally Posted by jackrabbit5 View Post
Well not exactly. As an employee, you are having 7.65% deducted from your pay, but your employer (you) also kicks in an equal amount. Your still paying in just as much, it's just not called "self employment tax" anymore.
True, I will have to look for my notes. I had a meeting last year with my acct, he showed me the math and benefits of both ways, all I remember that incorporating was better in my situation (my husband and I as owners and 1-2 employees).
We are exempt from WC and UI as owners.
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Old 02-16-2008, 11:24 PM   #31
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You guys get paid?
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