can't come to a decision on s-corp or llc.. help

[Steve K]

guys

ive got money coming in from a few projects ive agreed to do, and im at the point where i don't know how to set up my company.

what i do is consult businesses and help with their marketing. i've already earned several thousand dollars, but i dont know how exactly to set my company up for taxation purposes.

what i'm looking to do, is use my pretax $$ to invest and start other business'.

i dont need the money that my business is generating, as i have more than enough in my savings.


by the end of this year i should have around $110-120k NET profit.
with this money, i would like to invest the entire amount into 2 other business', which consists of: buying a laundromat for sale, and buying a 50% share of a medical supply company


ive spoken to a few lawyers and accountants, and i'm being told different things.
i'de like to do an llc with an s corp taxation, but i dont want to pay myself a salary (which an s corp requires)

so how do i structure this entity ? the consulting business has nothing to do with a laundromat.... i guess i'm looking to form a business that starts more buisiness' (not sure if that came out right)

 

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[Steve K]

edit: other way around, buying a 50% stake in a laundromat, and funding a medical supply store

 

[GlobalWealth]

Steve,
Did you and I talk recently about your structure? Not sure if it was you, but I had a call recently from someone in a similar situation looking to set up their legal structure. I remember speaking to someone about a laundromat. If not...

To be sure, you can get different answers because there is multiple ways of achieving this. Ultimately though, I would need to know the types of businesses and what is your desired outcome. Without this, I can only offer generalized advice.

An LLC is likely your best bet. If you are earning $120k/yr, why wouldn't you pay yourself a minimal salary? You do eat and live indoors, right? (jk). You can have your LLC taxed as a partnership (default status) or elect S-corp tax status. If you have earned income as opposed to passive income, this would be your best option as it will save you on the dreaded 15.3% self-employment tax.

You only pay the 15.3% on your salary, not on total profits like in a partnership. If you earn $100k and you are taxed as a partnership, you will pay $15,300 in self employment tax. If you are taxed as an S-corp and you pay youself a salary of $50k, you only pay the 15.3% on the $50k saving you nearly $8k in taxes.

 

[Steve K]

nope it wasnt me

but the reason i wouldnt pay myself a salary is because i'de like to invest as much as possible into a new business with pretax dollars


also, just so you know, i do NOT have a partner... .
i own 100% of my company

 

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[Steve K]

also
In New York City, S-corporations are subject to the full corporate income tax at a 8.85% rate. However if the S-corporation can demonstrate that a portion of its business was done outside the city, that portion will not be subject to the additional tax.
[edit]

 

[EastWind]

pay yourself minimal salary. if you already have another source of income, and you are paying yourself $3000 a month, that's $36k a year. that's reasonable salary. for a $100k yr business. how much tax are you going to pay on $36k? you are going to pay taxes either way. IANAL, IANAA (I'm not a laywer, I'm not an accountant)

 

[Kung Fu Steve]

I don't mean to hi-jack the thread but maybe the answer to this might help your decision:

I am being told different things as well. From what I have been told S-Corps are not taxed on money sitting in the bank. (but I have also been told that this is not correct, I hope it is because I didn't pay any sort of taxes on that money from my s-corp)

So if S-Corps are not taxed on money sitting in the bank, why not pay yourself a minimal salary like they are saying and sit on that money until you decide to invest in those others?

 

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[Steve K]

^i dont know
thats what im trying to find out
it's so frustrating because maybe im over analying things, but this is unbelievably frustrating

 

[kwerner]

Dude, if you're netting $100k+ a year, you should HIRE an expert (maybe GlobalWealth) to advise you with issues like this, rather than taking advice from random people on an internet forum.

I'm not trying to bust your balls, but seriously, leave important matters like this to experts that can develop a specific liability / tax strategy for your ENTIRE business(es).

 

[Rem]

Get professional help. If not, go with LLC :seeya:

 

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[andviv]

IRS has been cracking down hard on corps that pay their members too litle, as they know this is a way to avoid paying some taxes. The idea is to pay a compensation that is reasonable for the effort and in the same range as the market rates.

 

[Steve K]

^ the irs is cracking down on people who pay them selves too little, and take a chunk as distribution, to avoid paying payroll/medicaid tax


im not looking to pay myself EITHER
i just want to reinvest the money.

 

[Kung Fu Steve]

^ the irs is cracking down on people who pay them selves too little, and take a chunk as distribution, to avoid paying payroll/medicaid tax


im not looking to pay myself EITHER
i just want to reinvest the money.

But regardless you are still avoiding paying taxes which is the issue. S corps you must pay yourself. LLCs you do not.

Kacey - The funny thing is that I have two CPAs for my stuff and they contradict each other! Even though you're paying for advice, you might not get the answer you need :smxB:

 

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[Steve K]

problem solved
i will be forming a series LLC in the state of delaware.

 

[hatterasguy]

You need to build your team. Keep searching until you find an accountant you like that is familer with the kinds of business you are doing.

This is the kind of question your team members need to help you with.


On this site we can only realy give you general advice.

 

[max momo]

Steve K, how did you come to your decision.

One VERY IMPORTANT point not yet made in this thread is thus:

To determine what corporate structure would benefit you most, you must FIRST determine EXIT STRATEGY.

In many ventures, you make money when you buy.

In business you SAVE on expenses and taxes when you BEGIN.

If you plan on selling the company entirely in three years, or plan on selling stock in five years, or plan on passing real estate onto your heirs, these may all require different startup/finance/INCORPORATION strategies.

Plan the work then work the plan, as always.

 

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