I have a sole prop. and have known I needed to convert to LLC for a long time. After reading MJ's book, he recommends starting a S-Corp (to reduce self-employment tax). Can I do this with a 1 person company at this point (have done some research but can't find a straight answer)?. Thanks!
I am not a tax or legal guy, but an S-Corp has a limit on the maximum number of investors/partners. One person is an acceptable number, I have 2 S-corps and 1 C-Corp. The reason I did this is my C-Corp owns all the assets, and the S-Corps lease those assets (computers, desks, etc) from the C-Corp. If there is ever a legal issue, the only thing exposed as an asset is the bank account of the S-Corp. Other than the cost of the C-Corp setup, I have to pay my accountant $350.00 to file another tax return for the C-Corp, but that is pretty cheap insurance to protect all my assets.
yes, you can have an s-corp as a 1 person operation and the advantage is that your profits (similar to LLC) will flow through to you at the personal level and then you pay taxes on that. The Corp does not pay taxes on the profit only the shareholders do, thus no double taxation. And, you still get the same personal protections as the c-corp.
Not exactly true.
If you are ever sued personally, then your Ccorp shares are at risk, which puts your entire asset picture at risk.
A better option would be to have the assets owned by an LLC in the right state with the right operating agreement.
That way the assets would be safe from creditors if there were personal or business litigation and you could also lease the equipment to the operating company to lower the tax burden in that company and create passive income in the LLC.
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