How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Megan C Your Own Question

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 15588
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
23669918
Type Your Finance Question Here...
Megan C is online now
A new question is answered every 9 seconds

Hi I live in NJ. My daughter who is a minor (13y/o) wants

Resolved Question:

Hi I live in NJ. My daughter who is a minor (13y/o) wants to start a tshirt business and have a website. While doing some research I read that minors cannot have a business in their name. I also read about LLC's (w/partners and w/out) and also about S Corps. What entity would benefit us the most legally and tax wise if my daughter and I went in business together?? Would the proceeds get reported as income for me and would she also have to file income taxes?? Thank you in advance.
Submitted: 1 year ago.
Category: Finance
Expert:  Megan C replied 1 year ago.

Megan C :

Thank you for your question. My name is XXXXX XXXXX I will be happy to help you today

Megan C :

When you look at starting a business, people are looking to have liability protection and tax optimization

Megan C :

With a small business, an S Corp would be a good option for you. The reason being is that it will help you minimize any self employment taxes that you would have if you were a partnership or LLC

Megan C :

Your daughter would be a shareholder in the S Corp, and she would also need to file her own taxes, as she will have income

Megan C :

The same is true if you chose to be a partnership or LLC.

Megan C :

Your daughter is going to have income.

Megan C :

If you own part of the S Corp, part of the earnings would go to your tax return, and the other portion would go to her tax return

Customer:

Ok so if an S Corp is formed do we then form an LLC in order to have the limited liability protection and do we then make the LLC the beneficiary of the S Corp.

Megan C :

Well, an S Corp is a corporation. You would incorporate and then file form 2553 and elect to be treated as an S Corp

Megan C :

Either that, or you can open an LLC and file the same form and elect to be taxed like an S Corp

Megan C :

Either way, the S Corp gives you liability protection

Customer:

Ok thanks. XXXXX need to sit with an attorney and/or a cpa to find out which way (S Corp or an LLC taxed as an S Corp) would benefit us?

Megan C :

Honestly, both would protect you the same. But, I would go with the LLC because of the ease of formation and you don't have the same formalities as you do with a Corp. It's easier to maintain

Megan C :

With a corporation you MUST do certain things, like have annual meetings, etc or else you can "pierce the corporate veil"

Megan C :

It's harder to do that with an LLC ... it's much more flexible. Most small businesses are LLCs for that reason

Megan C :

But, a sit-down with an attorney is always a good thing if you have the ability to do that.

Customer:

Ahhhh yes I read something about the "pierce the corporate veil" issue online. Ok thank you for your advice.

Megan C :

You're welcome

Megan C :

How the S Corp reduces your tax is that you will pay yourself a salary based on your work with the business, and that's what FICA taxes are paid on

Megan C :

With a partnership or LLC taxed as a partnership you have to pay self employment taxes on your entire profit

Megan C :

As your daughter will be doing the work, she will get a salary from the business. You would get a small salary for any managerial duties that you do. But, the rest of the profit just has income tax

Megan C :

Do you have further questions about this?

Customer:

I see. So you do not have to pay taxes on the entire profit with an S Corp?? And self employment taxes is considered a higher tax bracket correct??

Megan C :

NO, you do pay income tax on all the profit. Self employment/FICA taxes are IN ADDITION TO income tax. So, you are essentially taxed twice = once as income, again as self employment

Megan C :

Those taxes go to fund Social Security

Megan C :

and Medicare

Megan C :

The income tax remains the same, no matter what option you choose. However, you will lower your self employment/FICA taxes if you are an S Corp

Customer:

Ok I have a better understanding now. I don't like the sounds of taxed twice though. I will take everything you have taught me into considertion when choosing. Thank you.

Megan C :

You're welcome. Once you have the information you need, please take a moment to rate my response positive so that I may receive credit for assisting you today

Megan C :

The rating feature is located along the bottom of your screen

Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 15588
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and other Finance Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Rakhi Vasavada

    Financial and Legal Consultant

    Satisfied Customers:

    2073
    Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
< Last | Next >
  • http://ww2.justanswer.com/uploads/RA/rakhi.v/2012-7-3_14374_RakhiVasavadaL.64x64.jpeg Rakhi Vasavada's Avatar

    Rakhi Vasavada

    Financial and Legal Consultant

    Satisfied Customers:

    2073
    Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
  • http://ww2.justanswer.com/uploads/BU/BusinessTutor/2012-2-2_115741_Kouki2.64x64.jpg Manal Elkhoshkhany's Avatar

    Manal Elkhoshkhany

    Tutor

    Satisfied Customers:

    1890
    More than 5000 online tutoring sessions.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    1755
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JK/jkcpa/2011-1-16_182614_jkcpa.64x64.jpg JKCPA's Avatar

    JKCPA

    CPA

    Satisfied Customers:

    838
    Bachelors degree and CPA with Accounting experience.
  • http://ww2.justanswer.com/uploads/starside8/2010-2-16_55433_DSCN1175.JPG Eric's Avatar

    Eric

    Financial Manager

    Satisfied Customers:

    558
    Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.
  • http://ww2.justanswer.com/uploads/FA/fastfile/2011-12-15_23139_Klein2011small.64x64.jpg R. Klein, EA's Avatar

    R. Klein, EA

    Accountant

    Satisfied Customers:

    397
    Intuit Ask a Tax Expert. QuickBooks Certified Pro Advisor (all editions)
  • http://ww2.justanswer.com/uploads/dkaplun/2009-05-17_173121_headshot_1_2.jpg Dimitry K., Esq.'s Avatar

    Dimitry K., Esq.

    Attorney

    Satisfied Customers:

    324
    NASD Licensed Rep, 1997-2001, Business Attorney
 
 
 

Related Finance Questions

Chat Now With A Financial Professional
Megan C
Megan C
2108 Satisfied Customers
Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level