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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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I was wondering what type of LLC or Corporation I would need

Resolved Question:

I was wondering what type of LLC or Corporation I would need to structure in order to avoid self-employment tax? Also, if you can briefly describe the main differences in taxes and liability protection between a C-corp and S-corp, I would appreciate it.

Would it be possible to have a full time salary job with a private firm and have a corporation on the side for part-time work?
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

 

Robin D :

Hello and thank you for using Just Answer,
Self Employment tax is the equal of FICA (SS and Medicare withholding for employees) so even if one is not self employed they are still going to pay half of the FICA (or have it withheld actually).
A C corp would not generate SE Tax for you but that is because the C corp would pay the tax on the earnings and half your FICA as an employee of the C Corp.
In reality you would be paying the taxes (because you would own the C Corp ) but you would not be showing SE Tax on your personal return.

Under S corp you would be an employee too, so FICA tax is paid as such.

Robin D :

Would it be possible to have a full time salary job with a private firm and have a corporation on the side for part-time work?

Certainly and if you organize your business as an S-corporation, you can classify some of your income as salary and some as a distribution. You'll still be liable for self-employment taxes (FICA) on the salary portion of your income, but you'll just pay ordinary income tax on the distribution portion.

Robin D41463.6930943056
Robin D :

If you organize your business as an S-corporation, you can classify some of your income as salary and some as a distribution. You'll still be liable for self-employment taxes on the salary portion of your income, but you'll just pay ordinary income tax on the distribution portion.

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7543
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 2 other Tax Specialists are ready to help you

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