I set up oMatthew Brambleangs an internet marketing company to help small businesses use grassroots strategies to sell oMatthew Brambleine through Facebook, Twitter, blogs and other social media strategies to promote their business. I started it with a partner who is also my best friend. Although I do not recommend doing business with a friend or family member, we have known each other for a long time and there were no start-up costs to start the business. What we do is mainly consulting, management and web development, so if we dissolve the case tomorrow, none of us will lose money. However, everyone’s start-up is different and there are two important things to take into account when forming a business: persooMatthew Bramble-rich liability and tax-saving. If you earn more than a few hundred dollars a month from your small business or ancillary activities today, you should not operate as a partnership or sole trader. Forming an LLC or S Corporation is the right move for many different reasons, but which one is better? Let’s see both.
Definition: A flexible form of business venture that combines elements of partnership and business structures. It is a legal form of a company, in the law of the vast majority of jurisdictions of the United States, that offers limited liability to the owners. An LLC, although a business entity, is a type of unincorporated association and is not a corporation.
- Pass-through taxes (are not taxed twice on profit)
- Limited liability. You are relatively protected from persooMatthew Brambleijke liability with regard to the business of the company
- Flexible tax elections (you can choose to be taxed as a sole trader, partnership or company).
- Much less paperwork and administration than a company
The LLC has become a very popular option for start-ups and for people with small businesses or small businesses who want and need protection against liability and flexibility in tax elections. Many people love how easy it is to install and there is virtually no paperwork to maintain. Depending on the state you live in, you should talk to someone in your state’s business and business department to find out if LLCs are being offered and if there are special provisions from other states.
Definition: A company that holds a valid election to be taxed in accordance with Sub-Chapter S of Chapter 1 of the Internal Revenue Code. In general, S Corporations do not pay federal income taxes. Instead, the income or losses of the company are distributed to and passed on to its shareholders. Shareholders must then report the income or losses on their own individual income tax returns.
- Huge tax breaks. Only taxed once, and FICA avoids taxes on profit / distributions.
- The personal property of the owner is protected against corporate debts and liability
- Companies have an unlimited life that goes beyond the illness or death of the owners
- Tax-free benefits such as deducting insurance, travel and pensions
- Transfer of ownership facilitated by selling shares
- Change of ownership does not have to affect management
An S Corporation is an excellent choice for a more advanced operation with multiple owners / shareholders and for those looking for capital from potential investors. It is much better than opting for a “C” corporation, because only the salary that you pay yourself from the “S” company is subject to federal and FICA taxes. The profits / distributions / retained profits of the “S” corps are only subject to federal income taxes, but not to FICA taxes.
What should you do?
My company is primarily consulting and management and there is me and a partner, so we have set up an LLC and opted to be taxed as an S company. What this does is that it combines the best of both worlds for the LLC and the S Corporation. We are an LLC, so that means less paperwork and limited liability, but we get the extra tax benefits from the S Corporation. We can pay ourselves a reasonable salary and then avoid social security and medical levies for the rest of the profits that we earn. If you set up an LLC as a single owner, the standard should be taxed as an owner, which means that you have to pay income tax and full FICA taxes that is around 15% on ALL net profits, not just the amount you pay yourself. If you are a single owner or a partnership, I would suggest going this route. It makes the most sense and you get the benefits of both entities. If you think you should set up an S company, I would consult a CPA and / or a lawyer who specializes in companies so that the paperwork is done properly and you can consult them if it really is the best option for you.
Do you have to start taking your social security benefits at the age of 62 or full retirement age?
Retired people are eligible to take up social security benefits from the age of 62 instead of having to wait until the full retirement age of 67, but you will receive a reduced benefit every month. So, you should agree with the reduced number that fits with an early retirement
10 legal myths about starting a small business
There are plenty of legal myths about the Small Business Act to confuse you, mislead you, and even harm you if you trust them. Like many myths, there is often a grain (or more) of truth to the common bits of not-entirely-correct wisdom of small business rules that you encounter