Hmmmm. I started the LLC because a friend and I are starting a website, and he suggested I protect myself in case for any reason people sue me…. the website is still not done but I’ve been using the LLC and it’s bank account for my other independent contracting business…. … uggg. going to see an accountant today.
James- Sounds like you have some serious misunderstandings about taxation. I’m sort of confused by your phrasing, as well. There’s no way I can give you an estimate baЕџka about your tax situation. The profit from the S-Corp helps you because it’s profit…I’ll repeat my previous refrain: see a professional. Having said that, I think the S-Corp was a poor decision. I would have gone Sole Proprietorship. Profits of $20,000, self employment tax, etc don’t justify the added significant problems of the S-Corp filings and payroll taxes. All that to save on SE tax on 20 grand? Come on, read the article. Sole proprietorship is the way to go for almost all side jobs besides your “straight” job. People think LLCs offer some level of magical legal protection. That’s almost never the case. Individuals almost always have to cosign stuff personally, and the LLC-veil is pretty easy to penetrate. And, in CA, the LLC tax is a deal breaker. And how in the world is it costing you guys so much to start these businesses? $850? Sweet Jesus…I can start an S-Corp in LA for about $100. Also, did you actually file paperwork with the IRS to elect S-Corp or are you just saying you started a corporation? For everyone who’s not willing to read this article: 1) SEE A PROFESSIONAL (CPA, ATTY, ETC). THIS WILL COST MONEY. BRING A CHECKBOOK. 2) IF CONFUSED, GO WITH SOLE PROPRIETORSHIP. IT WILL SPARE YOU THE WRATH OF TAX PAPERWORK. Having said those two items, I’m not going to write in here anymore as I’m pretty sure I’m doing more harm than good. The internet is not a replacement for a professional in person.
If you have an LLC and elect S-Corp status for IRS purposes are you in danger of loosing your LLC if someone sues you personally since to the eyes of the IRS you are an S-Corp?
Will the lawyer be more successful in convincing the judge to treat you as an S-Corp and liquidate your LLC and all assets that come with it?
I haven’t read all the comments and replies, so this may already have been discussed: The state of Wisconsin and a few other states have what’s called a “statutory close corporation” (aka “closely held corporation”) whereby the S corporation is not required to hold annual meetings and is not required to have a board of directors. Also, the close corp need only have one officer – in my case (Vedatel Inc), myself as president. That simplifies the corporate structure and bookkeeping.
You just added about 14 returns to do every year that I can think of right now
One other point to consider about the close corp or standard S corp in the state of Wisconsin (and possibly other states?) is, that the corporation can elect to exempt officers from paying unemployment insurance. However, the federales will require that the corporation pay double if the corporation pays no state UI. The upshot: at least you don’t have to remember to pay the state UI, a small but sometimes handy time saver.
I think I was waaay too premature in setting up a C corp for business still in planning phase on paper and just getting off the ground. So we reclassified to an S Corporation. No earnings yet… still very much in the development phase but we do have some basic expenses. Do we start filing quarterly now for expenses write-off claims if we don’t have reported income yet?