LLC taxed as S Corp in California

Submitted by SteveG on Sat, 05/10/2008 - 04:41.

Jon recommends starting out with an LLC if you aren't currently generating considerable income through IM.

I would like to create an LLC because of its ease of management (I don't want to bother with minutes and other paperwork), but I am already making a decent living with affiliate marketing.

Would it be wise to go with an LLC and elect to be taxed as an S Corp?

Also, some online sources have said that if you own an S corp you don't have to pay SE tax, while others say you do. Which is correct?

BTW, I live in California where we have to pay a minimum $800 entity level tax for LLC's, and Corporate income tax is 1.5%.

Hey Steve! Good to see you

Submitted by JasperP on Sat, 05/10/2008 - 06:44.

Hey Steve!

Good to see you here from the XP Forums

I'm also looking into a LLC now that I found some success with affiliate marketing

Are you running as a sole proprietorship right now? How do you manage all the expenses and stuff?

Ha... I don't even have a

Submitted by SteveG on Sat, 05/10/2008 - 07:52.

Ha... I don't even have a business entity right now. I just gave my 1099's to my tax preparer and he did the rest.

I did detail all of my business related expenses, including software, memberships, services, and advertising expenses. Just be sure to print out all of your receipts, download your sales reports from the affiliate networks, PPC networks, etc.

Next year though is going to be a beast, so I want to make sure everything is on the up and up with a legit entity and asset protection.

S Corp taxes

Submitted by markgustav on Fri, 05/23/2008 - 03:11.

First, a disclaimer: Check with a living breathing accountant on this one.

Also, some online sources have said that if you own an S corp you don't have to pay SE tax, while others say you do. Which is correct?

I believe the answer is a hybrid one. Self-employment tax is basically the half of the FICA (I think) that your employer would normally pay for you if you were working for someone else. Usually 7.5%. (half of 15%)

S-Corp owners can take what's called "distributions" on a certain portion of their income from the entity. This allows you to not pay the self-employment portion of your tax obligation on the distribution you take. (Whether you're an LLC that's elected to be taxed as an S-Corp via IRS Form 2553 or you incorporated as a straight S-Corp) HOWEVER! You cannot take 100% of your income as distributions. This is what I've been told numerous times from my accountants. It has to be a reasonable calculation based on what the average earner in your industry makes. I don't remember how they figure how much you can take as "distributions".

Just for the record, I immediately elect my LLC's to S-corp status on formation.

Thanks for the info Mark. I

Submitted by SteveG on Fri, 05/23/2008 - 05:06.

Thanks for the info Mark.

I submitted my application for my LLC and elected for S-corp status on Tuesday.

I got LegalZoom's gold package, so should get my docs back in a couple of weeks.

Average salary

Submitted by jonshaw on Wed, 05/28/2008 - 04:17.

The IRS has been using Salary.com to come up with what people in the same industry are earning. You can use that site as a basis for what kind of wage you need to take when you are making the big bucks.

Best,

Jon

Thanks for the tip on

Submitted by Jeremy Palmer on Wed, 05/28/2008 - 05:22.

Thanks for the tip on Salary.com. I was wondering if they had an internal index or relied on a third party.