So in a nutshell, LLC = less taxes VS Self Employed?

[luniac]

I may need to create an LLC this year and am a bit confused on the

"Pass Through" feature of S-Corp and generic LLC.

if the profits pass through to you as an individual, won't the tax rate be equal to self employment tax rate?

so besides the Limited Liability benefits of owning an LLC, there are no real income advantages?
besides maybe business cost write offs like equipment and that type of stuff?

 

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[CareCPA]

As an LLC owner and operator, you are still subject to self-employment tax. In fact, if you are a single-member LLC, your LLC will show up on the Schedule C of your tax return just like a sole-proprietorship would.

Any business expense can be written off, no matter what your entity type. As long as the money was used for business, and the expense is "ordinary and necessary" then it can be deducted.

The real tax-savings start to come into effect when you can convert to an S Corp, which requires you to take a "reasonable salary," and you can avoid self-employment taxes on amounts above that salary.

There are the more traditional tax-savings vehicles (401ks, IRAs, HSA and health insurance, etc), but those are not entity-dependent.

 

[Merging Left]

As an LLC owner and operator, you are still subject to self-employment tax. In fact, if you are a single-member LLC, your LLC will show up on the Schedule C of your tax return just like a sole-proprietorship would.

Any business expense can be written off, no matter what your entity type. As long as the money was used for business, and the expense is "ordinary and necessary" then it can be deducted.

The real tax-savings start to come into effect when you can convert to an S Corp, which requires you to take a "reasonable salary," and you can avoid self-employment taxes on amounts above that salary.

There are the more traditional tax-savings vehicles (401ks, IRAs, HSA and health insurance, etc), but those are not entity-dependent.

I don't want to hijack or get too in-the-weeds here, but what do you do with leftover profits in your S-Corp designated company, assuming you either don't want to keep profits in the entity for some reason or you need more than your basic salary to live on? Would you issue them to yourself as a dividend and pay a capital gains tax on them instead of an income tax? Or would it just be best to give yourself the salary level that you actually need, thereby increasing your personal income tax bracket?