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4 Replies Last post: Jan 8, 2009 8:12 AM by Bridge

S-Corp ...Wondering if I made a mistake

Jan 5, 2009 8:20 PM

Click to view rebma85's profile Start-up rebma85 2 posts since
Jan 5, 2009
Hi,

I went to an accountant last month because I wanted to start my business this month, Jan 2009. He told me the best entity was a S-Corp for my business.The way he explained it was that I would pay half the taxes that I'd have to pay with a LLC. Does this sound about right?

I haven't recieved my corporation paperwork yet, but my accountant already started billing me for payroll and sending in paperwork to the state. Is this something I can do myself with a good accounting program until I start making enough money to afford an accountants fees? I'm just wondering if a LLC would of been better.

Thanks!
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Click to view Bean Counter's profile Mogul Bean Counter 19 posts since
Jan 25, 2008
1. Re: S-Corp ...Wondering if I made a mistake Jan 5, 2009 8:43 PM
What kind of business do you have? Is it services or manufacturing?

There are some distincy difference between an S-corp and an LLC. But I would think taxes would be a more level playing field for federal taxes. The advantages of an LLC over an S-corp is that the LLC is more flexible in general.

I wonder if you CPA is referring to the fact you can pay low officer compensation and take distributions that are not subject to self-employment taxes? Similiar things can be done in an LLC with some tax planning,

There is some pending legislation that might change that S-corp distribution rule that you may want to keep an eye on.

In regards to your payroll issue. If you are small you may want to check out Bank of America payroll. It is free with a business account and makes the calcuations as well as files the forms. It is a very easy do it yourself payroll.

As for a good accounting program.... I use Quickbooks. It also comes with a payroll feature that is easy to use. Cost for payroll was around $150 per year when you purchase the Quickbooks. The Quickbooks Pro will set you back about $180.

I am hoping this helps a bit to ease your mind.
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Click to view rebma85's profile Start-up rebma85 2 posts since
Jan 5, 2009
2. Re: S-Corp ...Wondering if I made a mistake Jan 5, 2009 10:31 PM
in response to: Bean Counter

Thank you for the speedy response!

My business is providing a service. I should of checked out Bank of America first. I got a Suntrust business account but if I'm reading right..I should have another business account for payroll, right? I will be going to Bank of America if that's the case.


You definitely eased my mind. lol


Thanks again.

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Click to view LUCKIEST's profile SCORE LUCKIEST 7,938 posts since
Aug 6, 2007
3. Re: S-Corp ...Wondering if I made a mistake Jan 5, 2009 9:15 PM
S-Corp, Welcome

Who are you?? Go to Members page and share some info.

Do you know about SCORE. SCORE is FREE and can help you.

Good luck, LUCKIEST
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Click to view Bridge's profile Mogul Bridge 364 posts since
Jun 3, 2008
4. Re: S-Corp ...Wondering if I made a mistake Jan 8, 2009 8:12 AM
In an S corp,, the corporation is not taxed but income is "passed through" to your personal return. This allows for flexibility is reporting "income" versus "wages" and might have some tax benefits for you.

An LLC is not a recognized entity by the IRS. A single member LLC will be classified as a Sole Proprietorship for tax purposes. This could cause you to pay more taxes depending on how you plan to report wages versus income for your S corp.

But... as an LLC, you can file Form 8832 (Entity Election) with the IRS to have your LLC be treated as a corporation and then file Form 2553 Election by a Small Business Corporation to be taxed as an S corporation.

With an LLC, you have the flexibility to decide what type of tax entity you would like to be.

Your accountant should know this. So, an S corp. has no tax benefits over an LLC depending on the elections made.

LLC is a legal structure, not a tax structure.
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