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S corporations may have preferable self-employment taxes compared to the LLC because the owner can be treated as an employee and paid a reasonable salary. FICA taxes are withheld and paid on that amount. The owner of an LLC is considered to be self-employed and must pay the self-employment tax contributions towards Medicare and social security.Some benefits that shareholder/employees receive can be written off as business expenses,.but you an employee who owns 2% or more shares, the benefits like health and life insurance are deemed taxable income.You'll have to make a special election with the IRS to have the LLC taxed as an S-Corp using Form 2553. And you must file it before the first two months and fifteen days of the beginning of the tax year in which the election is to take effect.
I know it is difficult and you wan tto make sure that you do the right thing when making choices. I would advise you to work closely with your personal accountant as they can show you the actual dollar amounts involved in both entities. You will then be able to see the choices on paper dealing with real dollar amounts and how any savings on taxes would effect you.
Thanks that is helpful. I didn't know about the fact that you have to declare medical insurance as taxable income. Given the fact that our insurance is fairly high that could make a difference. In putting together the numbers from a tax perspective it seems reasonable to move to an S Corp status. Do you see any limits to flexibility that could be cause issues if I sell the business?