What Entity do You Use for your Business

[equinecpa]

I"m a sole proprietor with one part-time employee and one contract bookkeeper. I have always simply practiced as a sole proprietor.

I'm often recommending my clients organize an LLC and then elect to be an S corporation. I'm wondering why I haven't done that myself? I can organize as a PLLC as I'm a CPA. It even sounds official doesn't it?

So are there any drawbacks to a professional going the LLC/S corp route? I'm thinking it's time I started saving on self-employment taxes.....

Carolyn

[ChEAr$]

Certainly agree

with your reasoning. I incorporated way back in 1993 for the principal reason of protecting the name "Accutax" which I had been using since 1974. And yes, of course there have been SE tax savings as a benefit as an S corp. (grin)

Today, though I would take the LLC route and elect S corp status. The corporate state franchise tax is a flat $100, plus $10 to secretary of state, but an LLC doesn't pay that $10.

The only scare I ever got was maybe five years ago when IRS in it's finite wisdom sent out letters, to me included, trying to assess that PSC tax. About a week later when all of us all over the country complained about it, quoting the law of course, they saw the error of their ways. You would have thought that simply by having filed the 1120S would have precluded such a blunder. But... you know the bureaucracy.

[Lion]

Llc

Right now, I'm an LLC for some legal protection. Went from sole proprietor to LLC back some years ago for the protection. Then CT added a minimum $250 business entity tax for LLCs to match the minimum corporate tax. Might not have moved to an LLC if the fee was in existence when I made the change. So far, my profits are not so high nor from anything other than my own service as a tax preparer and bookkeeper that I could legitimately take distributions from an S-corp with no SE tax. If I start adding employees or otherwise generating profits from my capital contributions and not just my own services, I would consider an S-corporation. Am considering adding my husband as a member when he retires in another year and being taxed as a partnership to get my business off our Form 1040 (Schedule C). Even thinking about a C-corp to be able to pay benefits such as health insurance when we will no longer have my husband's through his current job, and not have to add to W-2.

[DMICPA]

Business Entity

I was an S-Corp. for many years in CA. Had to pay the various payroll taxes, minimum Franchase taxes, etc.

I didn't mind it when I had employees, but when I was the sole employee and shareholder, I moved to the mid-west and have been operating as a sole proprietorship. I have E & O insurance ($1,000,000) so I decided the corporate entity existence was not worth it.

To be fair, I have had many clients whom I felt should have been something other than a sole propreitorship but have insisted that they are fine with it, and they have prospered. Since they are now millionaires, I had little to argue with them on their choice of entity.

So, I decided to try this type of entity and so far no problems. It is so much easier than the Corporate formalities and since I am still the sole person, it is not worth the hassle.

[Edward]

I have a couple who are from a community property state and they have elected to go the Joint Venture route in which I will prepare two separate Schedule C's. Is there any other form of organization that I should consider for these people so they could save on S.E. tax? Will appreicate any help. By the way they are over-the road contract type truckers.

[dsi]

You indicate that you "contract out" your bookkeeping to a bookkeeper? Is there a reason this person isn't one of your employees?

[DMICPA]

Keep on Trucking

The couple will file two separate Schedule Cs and each pay the SS and Medicare tax. If earnings were over the maximum FICA, tax could be saved by filing one Schedule C for the husband as an example.

[taxxcpa]

LLC or S Corp

I"m a sole proprietor with one part-time employee and one contract bookkeeper. I have always simply practiced as a sole proprietor.

I'm often recommending my clients organize an LLC and then elect to be an S corporation. I'm wondering why I haven't done that myself? I can organize as a PLLC as I'm a CPA. It even sounds official doesn't it?

So are there any drawbacks to a professional going the LLC/S corp route? I'm thinking it's time I started saving on self-employment taxes.....

Carolyn

Since the LLC would be a disregarded entity, it might not help you avoid SE tax. In Texas there would be no franchise tax, but you would have to file a no-tax-due franchise tax return.
I would either form an S Corp or an LLC with an election to file as an S Corp.

[equinecpa]

Wow old thread revived. I set up an LLC and elected S corp status this spring. Hopefully Obama doesn't do away with the advantages of being an S corporation before I can reap it's benefits.

You indicate that you "contract out" your bookkeeping to a bookkeeper? Is there a reason this person isn't one of your employees?

Sure is...she picks up the work here, takes it home, does it on her own time on her own computer and does this for other people. Why would I treat her anything but contract labor?

I have a couple who are from a community property state and they have elected to go the Joint Venture route in which I will prepare two separate Schedule C's. Is there any other form of organization that I should consider for these people so they could save on S.E. tax? Will appreicate any help. By the way they are over-the road contract type truckers.

This couple would probably benefit from an LLC. They could file as a partnership with part of their earnings flowing to them as owners without SE taxes and part as SE income.