At around the 10min mark is where he points out the primary reason to be an S-Corp...the share holder distribution that is untaxed. 100k in net income is zero'd / split up as 50k as a W2 and 50k as a K1. You still report the K1 on your taxes but it is not taxed. Literally, 50% of your income is not subject to any tax withholdings at all. I have been doing this for years with my accountant. I believe the IRS code says Corp shareholders can receive a "reasonable" distribution that is not taxed. It's generally assumed that "reasonable" is half...
I was having confusions whether to go LLC vs S Corp and this video made me decide to go for LLC. I asked a doctor friend of mine who already have an established practice, and she suggested to choose S Corp. But I am just starting out so an LLC makes more sense. This video is very informative
Thank you for breaking it down this way! I've flip-flopped on which structure to use to begin my business. Now I realize I've been wrong the whole time...I need to BEGIN as an LLC and hopefully grow to need/change to S-CORP.
I appreciate your content. I would suggest people also consider the following. 1) the list of regulations, accounting costs huge difference, set up, servicing costs for the s-corp are substantial vs the LLC. 2) If an LLC is producing a K1 distribution into a SCH C the very same FICA tax benefit deduction is also available as employer/employee reducing the $15,300 tax to $7650. 3) depending on state income tax laws the tax on profits to an S corp far exceed the tax limits on revenues to an LLC $11,790 vs $15,000 on business revenues of $5mil with profits of $1mil in California. 4) once you start an S-corp you cant go back to an LLC but if you start as LLC you can always go to S corp status
THIS VIDEO REALLY HELPED ME DECIDING WHICH ENTITY TO GET. I WAS PLANNING TO FILE FOR S-CORP FOR MY PART TIME BUSINESS BEFORE WATCHING THIS VIDEO. DIDN'T KNOW THE TAX FILLING FEE WOULD BE SO HIGH (AND OTHER COSTS) FOR AN S-CORP. GLAD I FOUND THIS VIDEO!!! THANK YOU!!!
You just saved me from jumping the gun and going to file as an S-Corporation. I'm gonna wait to acquire some more assets and increase my clientele before I give myself the headache and cost of S Corp. Very informative vid. Thank You!
I not only liked this video. I Loved it! This was the most simple and clear explanation I've heard thus far. I'm so sick of people over explaining this. You just kept me from making a HUGE mistake in starting an S Corp tooo soon. I will most defiantly be hiring you in the upcoming year.
This has been thr BEST video Ive seen explaining in simple terms the pros and cons of filing as an LLC or an S-Corp. Thank you!!! Especially the recommendation at the end about when to file based on the soze of your business.
This video was very informative. Thank you so much for sharing. My question is, how do I dissolve an S-Corp and form an LLC? Yes, I formed an S -Corp too fast. Plans didn't work out and nothing has been done to really begin the S Corp Business.
Make sure you know how to do the proper deductions when filing your taxes or have an accountant that specifically knows the deductions that you can deduct that will save you tins of thousands of dollars in taxes
I am in the process of establishing a logistics company and anticipate a gross revenue of approximately 560k USD within the first year of operation. As I consider operating as an S-corporation, I seek clarification on whether I am obligated to compensate myself with the minimum salary mandated by the state.
insightful basic but not at the at advance level. You can set up the LLC - manager with the lowest ownership or through teir partnership/-corp. LLC as partnership has many advantages that S-Corp does not have, such as cash and property ditributions, but the best part is special allocations that S-Corp cannot have. A SMLLC should always become the s-Corp.
Thank you for this information. I plan on opening my business soon. From this video alone it’s seems more reasonable to start off as an LLC then later level two s corp. my dream is to become level 3 (passive owner) within a two year span. With the area that I am in and the demand for what is being requested I feel 1000% positive on this idea. It’s just time to make this dream a reality one step at a time #BBO ❤
Best video on UA-cam that sums it all up! I spent 3 hours watching videos until I came to this one. Knowledgeable company, worth using as a tax advisor.
Such an good video. I was leaning towards starting the LLC S-corp right away, but after your points at the end of the video, it totally makes more sense to wait till I reach higher profits to justify the additional cost and headaches from the requirements in the S-corp world. Thank you!
Very simply explained and helpful in choosing between the two. We were suggested to start with an S-Corp but in listen here, we are able to make a more informed decision on what to start with then move to later. Thank you for providing this information.
Thank you! Please make several examples about scenario 3, looking for more information about that. For example about Real estate in scenario 3, about stocks, and about IT online business that make more than 1M in a year.
What do you think about filing your LLC in Delaware?. One Of my reasons would be I don’t want someone to be able to know that I’m the owner of the company.
Very great video overall. Under the Self-Employment tax section of this video, did you mention SE taxes are capped at $160K? I believe only the social security tax component of the SE tax is capped at the limit. It doesn't seem the medicare component is capped. I'm open to chatting about this further
I appreciate this video !! You answered my question - I need to “lower” my SCorp to an LLC cause I DO NOT have the net income for an A Corp (at this time) lol.
Everyone in a buisness needs to watch this video Seriously, thankyou so much for that info! Unbelievably excellent and to the point explanation! One thing im curious of, if a s corp does do a 50k salary and pays the 15.3% on that, then has a distribution of 50k with no 15.3 self employment tax does the distribution still pay out fed 15%+- and state 7%+- taxes?
Beautiful explanation of the pros and cons of LLC and S-Corp thanks 🙏🏾. I have one question if you file for $100,000 as an S-Corp and pay your taxes only on the $50000 when you go to purchase a home what would they consider your annual salary to be $100000 or $50000
Omg! I can’t thank you enough for this video! I was conflicted on how to go about starting a new business and this video helped me tremendously. Thank You 🙏🏼 so much!
Everything was good. Except I don't know what type to choose if we are level 3? Keep as LLC but let them know its manager managed? I guess its confuses me - what if my spouse owns the business and I am the manager. Is keeping it as manager managed LLC better than S corp? Say profit is 200-300K..
Such great information! Easy to understand, infomative, and very well structured. I really appreciate the warning on starting an S-Corparation too early. Thanks!
Between LLC and S-Corp, which would suit someone who is seeking to form a company for owning music publishing and releasing music, no starting profit/capital, and only one owner?
Would like to know what is more suitable for only a 1 employee- self owned business in Texas. S corp or LLC? What would be the best option to save in TAX money but also not too liable
how much should we be setting aside for taxes? is that based on each time a client pays us or how do we figure out how much to set aside each time someone buys our service?
Great information! Thank you, made making my decision to start as an LLC and once I have a nice net profit file as an SCorp :) Once I do this, should I completely change to running the biz as an SCorp? or continue as an LLC taxed as an Scorp?
very interesting video but you wasnt clear of the point if you get to level 3 and become passive business owner. at that point do you ellect LLC or S cooperation? thank you .
This video was a comprehensive overview for some of the info I was looking for. It was a perfect outline of the general knowledge with some specifics. I've got some questions that pertain to my exact situation & future, but I'm going to peruse your other videos to see if I can find an answer. Nevertheless, I'm subbed.
I have a home business LLC in my home, and able to claim one room as my office. Planning to move out of the state, but I want to rent a 6-12 apartment. I would like to know if I still will be able to claim one bedroom of the apartment as an office in my next taxes.
When it comes to health insurance as a small business owner, do you recommend setting up an HRA? does an HRA save more in tax liability than getting the tax credit with health insurance through the marketplace? For example, if your tax credit through the marketplace is about $14,000 for the year, would you be able to deduct enough with the HRA to save $14,000 in taxes?
I have an LLC electrical business. How does a tax write off work with a truck? I’m looking into purchasing one but don’t understand how it works and what kind of truck I can buy. Can it be a Ford tremor for example?
For scenario 2 , you wouldn’t pay 15.3 self employment tax because you are an EMPLOYEE OF YOUR COMPANY. So your company would pay 7.5 % or so and you as the w2 employee would pay the other 7.5%
His main point, which is valid, is that now the 15.3% in total taxes comes out of the $50k and not the full $100k, so the total overall tax burden is far less. Even if you pay half and your employer pays half, the whole point is it’s on $50k and not the full $100k.
Thank you for the video. One question what happens to that $50k dividend income going to owner is it also taxable or tax free since the impact is show only in self employment tax but what will be the overall tax including tax on dividend income?
Stumbled upon your videos today and I have a question. My husband has a small home improvements business. He is the only one who does the work. No employees. He runs it as a dba. Last year I began putting income and expenses into an accounting software. When I recently did our taxes online, I have to enter his income and expenses. You said something in a previous video about reporting your net income for tax purposes. So, if he brought in $100,000 and had $20k in expenses such as building materials, work apparel, tools, etc..., do I record his income as being $80,000 and then do not list the expenses on turbo tax? I entered in turbo tax, $100k income, $80k expenses, then had other deductions such as a home office, phone, internet, etc.... Can you please clarify this for me?
I have a small Mercari store. The most I NET is $2500 a month . If that much . Also I am selling crap I bought and selling for less. So I’m losing money . I have receipts showing I am losing money
How does the IRS know if your income is passive or not? Couldn’t someone simply lie and say their income is passive to avoid paying the self employment tax even though they worked inside the business all year with employees on payroll as well?
Free tax planning:-So this is how it will work. Have two companies one in a tax haven country n the other in usa. Then the company in the tax haven will hold your trade name. So you will have to receive invoice or have an agreement to pay an amount to this company in the tax haven for the use of the trade name. This amount will end up putting your usa business into loses each year n no tax will be paid. Take a screenshot. The good thing is . The company in the tax haven can pay for your expense in the US as a consultant and pay you in stock so you don’t pay on self employment income. Let me know if you have other tax planning strategies like this.
![14 Biggest Tax Write Offs for Small Businesses! [What the Top 1% Write-Off]](http://i.ytimg.com/vi/5YggWhLeckM/mqdefault.jpg)
This was the BEST video I saw about whether to file as an S Corp or LLC. Clear, succinct, and with practical examples. Excellent work! Thank you.
At around the 10min mark is where he points out the primary reason to be an S-Corp...the share holder distribution that is untaxed. 100k in net income is zero'd / split up as 50k as a W2 and 50k as a K1. You still report the K1 on your taxes but it is not taxed. Literally, 50% of your income is not subject to any tax withholdings at all. I have been doing this for years with my accountant. I believe the IRS code says Corp shareholders can receive a "reasonable" distribution that is not taxed. It's generally assumed that "reasonable" is half...
I was having confusions whether to go LLC vs S Corp and this video made me decide to go for LLC. I asked a doctor friend of mine who already have an established practice, and she suggested to choose S Corp. But I am just starting out so an LLC makes more sense. This video is very informative
I'm still filing as an S-corp because I don't intend on paying myself much and can easily do my own accounting.
👼😊
So the moral of the story... We should start the LLC first.. and once you start making money you should switch to an S corp
Correct. Work with a good CPA who will guide you and make sure you track expenses.
Thank you for breaking it down this way! I've flip-flopped on which structure to use to begin my business. Now I realize I've been wrong the whole time...I need to BEGIN as an LLC and hopefully grow to need/change to S-CORP.
What is your business model? You can start as a sole proprietorship.
@Jennine Morel sole proprietorship would not work for my business. That's why I had to figure out if I needed an LLC or an S-Corp.
@Nikolai Krow what is your business model?
I am an accountant and business consultant 20 years now...just curious.
I might have some suggestions
@@jenninemorel7693what would you recommend for starting a pressure washing business?
Thanks for breaking down the consequences of becoming an s corp too early. Ive been searching for that info for weeks.
I appreciate your content. I would suggest people also consider the following. 1) the list of regulations, accounting costs huge difference, set up, servicing costs for the s-corp are substantial vs the LLC. 2) If an LLC is producing a K1 distribution into a SCH C the very same FICA tax benefit deduction is also available as employer/employee reducing the $15,300 tax to $7650. 3) depending on state income tax laws the tax on profits to an S corp far exceed the tax limits on revenues to an LLC $11,790 vs $15,000 on business revenues of $5mil with profits of $1mil in California. 4) once you start an S-corp you cant go back to an LLC but if you start as LLC you can always go to S corp status
btw LLC Ca state tax is maxed out in LLC $5 mil in revenues whereas S corp income tax @ 1.5% unlimited profits are taxed
Wait can you type your 2nd point, differently? It is because i'm not quite sure i know exactly what you mean.
@@badhairday86 The SCH C business gets all the same self employment tax deductions the S corp W2 gets
@@kronkron5478so say me and a family member want to start a business, we should start as an llc, would we be required to have a k1 or schedule c
THIS VIDEO REALLY HELPED ME DECIDING WHICH ENTITY TO GET. I WAS PLANNING TO FILE FOR S-CORP FOR MY PART TIME BUSINESS BEFORE WATCHING THIS VIDEO. DIDN'T KNOW THE TAX FILLING FEE WOULD BE SO HIGH (AND OTHER COSTS) FOR AN S-CORP. GLAD I FOUND THIS VIDEO!!! THANK YOU!!!
I’m glad you watched and enjoyed it. S corps are definitely not for everyone!!
You just saved me from jumping the gun and going to file as an S-Corporation. I'm gonna wait to acquire some more assets and increase my clientele before I give myself the headache and cost of S Corp. Very informative vid. Thank You!
Subscribed
Omg, where have you been all these years⁉️Thank you so much‼️
I not only liked this video. I Loved it! This was the most simple and clear explanation I've heard thus far. I'm so sick of people over explaining this. You just kept me from making a HUGE mistake in starting an S Corp tooo soon. I will most defiantly be hiring you in the upcoming year.
This has been thr BEST video Ive seen explaining in simple terms the pros and cons of filing as an LLC or an S-Corp. Thank you!!! Especially the recommendation at the end about when to file based on the soze of your business.
Hi Sean, I have to say you are one of the best I have seen on thus far. Truly clear and concise
Excellent video ! Cleared my doubts and got clarity in deciding LLC vs S-Corp. Amazing work !
After 11 days of searching.. i came across this video and got my answer in 15min and 20 seconds 😂.. 🙏🏽 🙏🏽 👏 👏
Exactly.. awesome content, that's what we were looking for 🎉
Oh my gosh! I have just paid £220 to register my sole trading trademark and now I will not eat properly this month. I feel like I am acting crazy!
This is clear and straight to the point.thank you.
This video was very informative. Thank you so much for sharing. My question is, how do I dissolve an S-Corp and form an LLC? Yes, I formed an S -Corp too fast. Plans didn't work out and nothing has been done to really begin the S Corp Business.
Excellent video on helping distinguish between the two. Very informative!
Make sure you know how to do the proper deductions when filing your taxes or have an accountant that specifically knows the deductions that you can deduct that will save you tins of thousands of dollars in taxes
What happens with the distribution in scenario2? and the net profit in scenario3 when becoming passive with the general manager?
My favorite topic good job with this!
I am in the process of establishing a logistics company and anticipate a gross revenue of approximately 560k USD within the first year of operation. As I consider operating as an S-corporation, I seek clarification on whether I am obligated to compensate myself with the minimum salary mandated by the state.
Thanks for describing when a LLC should switch to an SCorp! That was helpful!!!
insightful basic but not at the at advance level. You can set up the LLC - manager with the lowest ownership or through teir partnership/-corp. LLC as partnership has many advantages that S-Corp does not have, such as cash and property ditributions, but the best part is special allocations that S-Corp cannot have. A SMLLC should always become the s-Corp.
what if you don't make any money starting off with your LLC is there any taxes to pay?
Outstanding presentation. Very clear and informative. Do you have a video comparing a Disregarded Entity and a Partnership LLC?
Thank you for this information. I plan on opening my business soon. From this video alone it’s seems more reasonable to start off as an LLC then later level two s corp. my dream is to become level 3 (passive owner) within a two year span. With the area that I am in and the demand for what is being requested I feel 1000% positive on this idea. It’s just time to make this dream a reality one step at a time #BBO ❤
I got LLC sole member and plus I use trailor brand and they don't be taxing me that much this year in beginning this yr it was almost 300 hundred
Best video on UA-cam that sums it all up! I spent 3 hours watching videos until I came to this one. Knowledgeable company, worth using as a tax advisor.
Very high quality explanation. Thank you.
Such an good video. I was leaning towards starting the LLC S-corp right away, but after your points at the end of the video, it totally makes more sense to wait till I reach higher profits to justify the additional cost and headaches from the requirements in the S-corp world. Thank you!
Very simply explained and helpful in choosing between the two. We were suggested to start with an S-Corp but in listen here, we are able to make a more informed decision on what to start with then move to later.
Thank you for providing this information.
Great info this was super helpful ! Subscribed
Thank you! Please make several examples about scenario 3, looking for more information about that. For example about Real estate in scenario 3, about stocks, and about IT online business that make more than 1M in a year.
Wow, Bro! You are one of the elite and best instructors I have heard in while. Kudo to you!
What do you think about filing your LLC in Delaware?. One Of my reasons would be I don’t want someone to be able to know that I’m the owner of the company.
Very great video overall. Under the Self-Employment tax section of this video, did you mention SE taxes are capped at $160K? I believe only the social security tax component of the SE tax is capped at the limit. It doesn't seem the medicare component is capped. I'm open to chatting about this further
Thank you, this is totally my gameplan now
I appreciate this video !! You answered my question - I need to “lower” my SCorp to an LLC cause I DO NOT have the net income for an A Corp (at this time) lol.
Everyone in a buisness needs to watch this video
Seriously, thankyou so much for that info! Unbelievably excellent and to the point explanation!
One thing im curious of, if a s corp does do a 50k salary and pays the 15.3% on that, then has a distribution of 50k with no 15.3 self employment tax does the distribution still pay out fed 15%+- and state 7%+- taxes?
What about for an independent hairstylist starting their business? Not salon- but just me myself
Beautiful explanation of the pros and cons of LLC and S-Corp thanks 🙏🏾. I have one question if you file for $100,000 as an S-Corp and pay your taxes only on the $50000 when you go to purchase a home what would they consider your annual salary to be $100000 or $50000
Super great video for the non-accountants out there, thank you for giving me direction!
What would be recommended for a small startup for a car dealership?
So clear man. First time watcher. Looking forward to more. Thanks for the concise and clear information
Thank you so much for your info and your super clear presentation and options, this is the most comprehensive list I've seen on YT on this topic
One of the best instructional videos I’ve seen. Very clear and concise. 👍🏼👍🏼👍🏼
Hell yea thank you Steve Urkel! Great explanation!
Omg! I can’t thank you enough for this video! I was conflicted on how to go about starting a new business and this video helped me tremendously. Thank You 🙏🏼 so much!
Everything was good. Except I don't know what type to choose if we are level 3? Keep as LLC but let them know its manager managed? I guess its confuses me - what if my spouse owns the business and I am the manager. Is keeping it as manager managed LLC better than S corp? Say profit is 200-300K..
Unbelievably prompt and informative. Thank you for this treasure trove of information!
Such great information! Easy to understand, infomative, and very well structured. I really appreciate the warning on starting an S-Corparation too early. Thanks!
Great info delivered in a easy to understand and engaging manner!
Thank you so much! I finally understand these topics!
Same boat
This was an awesome video. You explained everything clear as day. I appreciate your time and keep up the good work.
How much in profit should we be making before considering a S corp election?
Very informative, appreciate it brother !
By Far, One of the best video that I ever seen ! .. helped me a lot ... Thanks ❤❤❤
Between LLC and S-Corp, which would suit someone who is seeking to form a company for owning music publishing and releasing music, no starting profit/capital, and only one owner?
Would like to know what is more suitable for only a 1 employee- self owned business in Texas. S corp or LLC? What would be the best option to save in TAX money but also not too liable
The best video, watched 3 times.
The best explanation so far.
One part I'm missing (sorry if I didn't get it) is what happens with the SCorp distribution amount. Do you just... keep it for yourself tax-free?
how much should we be setting aside for taxes? is that based on each time a client pays us or how do we figure out how much to set aside each time someone buys our service?
You guys are always so clear in your explanations. Thank you
AMAZING VIDEO!! THANK YOU SO MUCH FOR GVING EXAMPLES. WOW NEED TO SIGN UP FOR AN S CORP. GREAT VIDEO.
Great information! Thank you, made making my decision to start as an LLC and once I have a nice net profit file as an SCorp :) Once I do this, should I completely change to running the biz as an SCorp? or continue as an LLC taxed as an Scorp?
very interesting video but you wasnt clear of the point if you get to level 3 and become passive business owner. at that point do you ellect LLC or S cooperation? thank you .
Can you elaborate on the equipment leasing companies or do you have a video on that. We currently rent portable toilets, would this qualify?
This video was a comprehensive overview for some of the info I was looking for. It was a perfect outline of the general knowledge with some specifics. I've got some questions that pertain to my exact situation & future, but I'm going to peruse your other videos to see if I can find an answer. Nevertheless, I'm subbed.
Thank you! Thank You! This was a great video. I have been so confused and now I have a clear understanding. You explained everything very well.
I have a home business LLC in my home, and able to claim one room as my office. Planning to move out of the state, but I want to rent a 6-12 apartment. I would like to know if I still will be able to claim one bedroom of the apartment as an office in my next taxes.
Great clear and concise information! Thanks for walking us through it!
Excellent video! Thank you for your amazing work!
My favorite business finance channel!
Wow, very good video. I feel like I just took a 2 week crash course. Keep up the good work!
When it comes to health insurance as a small business owner, do you recommend setting up an HRA? does an HRA save more in tax liability than getting the tax credit with health insurance through the marketplace?
For example, if your tax credit through the marketplace is about $14,000 for the year, would you be able to deduct enough with the HRA to save $14,000 in taxes?
I have an LLC electrical business. How does a tax write off work with a truck? I’m looking into purchasing one but don’t understand how it works and what kind of truck I can buy. Can it be a Ford tremor for example?
For scenario 2 , you wouldn’t pay 15.3 self employment tax because you are an EMPLOYEE OF YOUR COMPANY. So your company would pay 7.5 % or so and you as the w2 employee would pay the other 7.5%
His main point, which is valid, is that now the 15.3% in total taxes comes out of the $50k and not the full $100k, so the total overall tax burden is far less. Even if you pay half and your employer pays half, the whole point is it’s on $50k and not the full $100k.
Very insightful content. Thanks for sharing
I like your video presentation. It is informative too, at the same time. Thanks a lot for your guidance!
Thank you for the video. One question what happens to that $50k dividend income going to owner is it also taxable or tax free since the impact is show only in self employment tax but what will be the overall tax including tax on dividend income?
Great video! Very helpful
Stumbled upon your videos today and I have a question. My husband has a small home improvements business. He is the only one who does the work. No employees. He runs it as a dba. Last year I began putting income and expenses into an accounting software. When I recently did our taxes online, I have to enter his income and expenses. You said something in a previous video about reporting your net income for tax purposes. So, if he brought in $100,000 and had $20k in expenses such as building materials, work apparel, tools, etc..., do I record his income as being $80,000 and then do not list the expenses on turbo tax? I entered in turbo tax, $100k income, $80k expenses, then had other deductions such as a home office, phone, internet, etc.... Can you please clarify this for me?
what are the requirements of a llc that's owned by a single member that would allow them to be an s corp shareholder? Referencing 4:40 mark
I have a small Mercari store. The most I NET is $2500 a month . If that much .
Also I am selling crap I bought and selling for less. So I’m losing money . I have receipts showing I am losing money
This is great video. It is so informative and helpful. Thank you! I'm subscribing! and sharing!
Great message
Thank you
Please get some speech coaching
How does the IRS know if your income is passive or not? Couldn’t someone simply lie and say their income is passive to avoid paying the self employment tax even though they worked inside the business all year with employees on payroll as well?
Free tax planning:-So this is how it will work. Have two companies one in a tax haven country n the other in usa. Then the company in the tax haven will hold your trade name. So you will have to receive invoice or have an agreement to pay an amount to this company in the tax haven for the use of the trade name. This amount will end up putting your usa business into loses each year n no tax will be paid. Take a screenshot. The good thing is . The company in the tax haven can pay for your expense in the US as a consultant and pay you in stock so you don’t pay on self employment income. Let me know if you have other tax planning strategies like this.
Excellent video! I loved the last part on considerations. Great job!
What is the best for a tax preparer with a domain?
super informative, very easy to understand. Great info. Thank you.
If an S Corp is a tax status, not an entity, how can it hold LLCs inside of it?
Thank you very much. I definitely liked the video. It was very helpful. I’m going to start an my second LLC
Great video straight to the key points
This is a fantastic video! Thank you for sharing!
Best video on this topic. Many thanks!