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I am in the process of starting a startup. I expect that for…

I am in the process...
I am in the process of starting a startup. I expect that for the first few years that the startup would lose money. With the changes in Tax law in 2018.. what is the most favorable structure for my startup (LLC, C Corp ,or S Corp)? I file a joint married return, and will have income outside of this startup around $375K.
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Answered in 1 minute by:
3/13/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Finance
Satisfied Customers: 2,610
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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My name is***** will assist you today.

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What type of business will you be starting and will you be the only employer/owner?

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The LLC and S Corp will allow the losses to be allocated directly to you on your personal tax.

The LLC doesn't require you to pay yourself as an employee.

Continued...

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Customer reply replied 4 months ago
I will be the owner and the only employee. Work would be done offshore through a contract with a third party. Am I required to pay myself a salary with either LLC or S Corp ?
Customer reply replied 4 months ago
Of course.. I do expect that I would pay taxes for any pass though income.. but what about losses .. can I deduct from taxes ?

The lossess will also flow through to you on line 12 of your 1040 if you choose a LLC or S Corp. A C Corp would retain the losses, itself

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You will only pay yourself as an employee under S Corp.

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From what you have shared, I suggest starting your company as a LLC and when your profits grow to at least $30K then you would want to consider electing to be taxed as an S Corp.

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Generally, the reason why a tax payer may choose between a LLC and an S Corp is due to employment tax.

As a LLC all of your profit is subject to Self Employment tax. As a S Corp only the portion you pay yourself as salary is subject to employment tax.

Please let me know your follow up questions.

Thank you.

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Finance
Satisfied Customers: 2,610
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Customer reply replied 4 months ago
OK. Thanks.
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