LLC As An S-Corp
I set up my single member LLC as an S-Corp for tax purposes. I plan on making about 100k after expenses. My new CPA has questioned my choice of an S-Corp. I created the LLC several years ago and can not remember why I choose the S-Corp for taxation.
Does anyone have any info that I can use for an answer to my CPA?
Thanks
Brenda
I would sy your CPA is a little older and not up on current tax avoidance strategy.
That said, the LLC taxed as a SCORP is an unknown quality and has not had a real record in court that can be referenced (as per my tax attorney).
He has said that there is some tendancy to say of it walks,talks like a duck it must be one
Our LLC has stock; nine shares of which I own one. Could have been 9 million if I had wanted to set it up that way, however when you have too many shareholders or shares can be exchanged without restrictions you then fall under the rules of the SEC.
Chris
Do you have a link to the IRS site where you read that? An S Corp does just that--the individual pays no SE tax on the distribution; however, a salary must be taken out eventually.
[addsig]
Everything I can find on the Net so far confirms that once an LLC elects S Corp status, it then files an 1120 S for tax puposes and pays no SE tax on its distributions (just payroll tax on the salaries).
[addsig]
OK, my LLC is for flips. I am a single member LLC. I am the managing member. There is no stock. Just started payroll. I am going to pay myself 50k a year in payroll and plan on doing about 30k in distributions. There will be about 20-50k in retained earnings.
Must confess that I did not understand all the discussion. Can someone try to sum it up? Sorry for my ignorance.
I just read that SE tax is capped at $87,000. So last year when I had my regular day job that paid close to 87k, having an S-Corp did not save me much if any money. This year I quit my bank job and will only have payroll from my S-Corp. As I said, I plan on giving myself 50k salary. But I have also read that as a rule of thumb, you should try to pay yourself 40% of S-Corp profit which is about 50k so I should be good.
Brenda, what were the other two options the article mentions?
[addsig]
The cost of the signage. Whether or not you can take additional deductions on a car depends on many factors. According to the IRS, simply placing advertising on it does not make it a business vehicle.
[addsig]
Can anyone comment on this scenario (which is probably very common amongst the newer investors)?
The car is not exclusively for business, has lettering (I BUY HOUSES .###-###-#### on one,two or three windows, and magnetic/removable signs for the sides.
Is that enough info to get some ballpark idea of how the deductions will be treated? For example, would deduction be limited to actual , one time costs of the materials? Ongoing deductions for Your "mobile/outdoor advertising campaigns"? Fixed deductions or % of business use for the vehicle?
I realize I may not get CPA advice here, just hoping someone else happens to have a similar situation.
Scott
depending on the mileage split between personal and business, I would lean toward taking the mileage or actual car costs.
If you lived in the place as your principal residence for 24 of the past 60 months you would qualify for the 250k/500k exclusion from capital gains taxes. You will most likely need to pay taxes on the depreciation taken as a rental at teh 25% tax rate. See the IRS website at www.irs.gov or your tax advisor for further details.[ Edited by finniganps on Date 02/19/2007 ]
You have to own and live in the property for a total of 24 months out of the last 60 months in order to qualify for the $250,000/$500,000 tax free exclusion. It is a 60 month "look back" at the date of closing. You look back 60 months and count how many months that you actually owned, lived and treated the property as your primary residence. So, if you own and lived in it for 8 years before the 2 years as rental, you should qualify for the $250/$500 tax free exclusion. It will not defer any depreciation recapture, but 2 years will not produce much in the way of depreciation recapture.
It would certainly qualify for 1031 exchange treatment if you intend to acquire replacement investment property; but starting a business does not qualify unless you need to acquire real estate to operate your new business in. Real estate used in your trade or business would qualify as investment property for 1031 exchange treatment.
[addsig]