I'm looking to become an independent consultant for small to medium sized businesses. I don't plan on hiring any employees within the first year.
Before I start with the questions, the business and I will be located in the state of New Jersey. This should help answer my questions.
The two routes I was looking at would be a Professional Liability Company or S-Corporation. I'm not sure which route most consultants take and which would be better for one. I then hear there are two ways you can pay yourself. Either as an employee providing services or pass-thru (single taxed). Again, which do most consultants go with, and most importantly why?
Once I get an idea as to which route to go for the business structure and how to pay myself, I can begin the process of applying for business - file EIN and do the new business online registration.
Onto the second series of questions:
1. If I pay myself as a pass-thru, I just file like I would on my personal taxes - 1040 - Schedule C (for business income) ? Do I have to report my earnings each month or quarter still to have my taxes taken out so i'm not hit with any possible fines or large tax payment on/by April 15th?
1a. How and when do I pay Fed/State/Medi/FICA, etc?
2. If its better to be an employee and pay yourself as you were providing services, how would I go about paying myself - with all the deductions (Fed/State/Medi/FICA, etc) ?
2a. How do I report the business income, how often, and to which agencies?
3. Do I need to file any annual reports for either business structure? What needs to be included?
4. If acting as an S-Corp, how do I issue shares to myself? How do I determine the value of each share and can I issue myself more than 1 share?
4b. Reason I ask, if I decide as a corporation, I would like to sell some of the shares to my family members to raise capital. In return, I will pay them dividends at the end of each quarter depending on how well the company does. What is the most percentage I can give them without complicating things? Is it less than 5% before they become a vital role in making business decisions?
Thanks for answering my questions. I know its a lot and I should ask a tax advisor, but I also like to hear from other people so I can get a general idea of everything before I visit one.
Before I start with the questions, the business and I will be located in the state of New Jersey. This should help answer my questions.
The two routes I was looking at would be a Professional Liability Company or S-Corporation. I'm not sure which route most consultants take and which would be better for one. I then hear there are two ways you can pay yourself. Either as an employee providing services or pass-thru (single taxed). Again, which do most consultants go with, and most importantly why?
Once I get an idea as to which route to go for the business structure and how to pay myself, I can begin the process of applying for business - file EIN and do the new business online registration.
Onto the second series of questions:
1. If I pay myself as a pass-thru, I just file like I would on my personal taxes - 1040 - Schedule C (for business income) ? Do I have to report my earnings each month or quarter still to have my taxes taken out so i'm not hit with any possible fines or large tax payment on/by April 15th?
1a. How and when do I pay Fed/State/Medi/FICA, etc?
2. If its better to be an employee and pay yourself as you were providing services, how would I go about paying myself - with all the deductions (Fed/State/Medi/FICA, etc) ?
2a. How do I report the business income, how often, and to which agencies?
3. Do I need to file any annual reports for either business structure? What needs to be included?
4. If acting as an S-Corp, how do I issue shares to myself? How do I determine the value of each share and can I issue myself more than 1 share?
4b. Reason I ask, if I decide as a corporation, I would like to sell some of the shares to my family members to raise capital. In return, I will pay them dividends at the end of each quarter depending on how well the company does. What is the most percentage I can give them without complicating things? Is it less than 5% before they become a vital role in making business decisions?
Thanks for answering my questions. I know its a lot and I should ask a tax advisor, but I also like to hear from other people so I can get a general idea of everything before I visit one.
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