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: Tax
Satisfied Customers: 16580
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
23669918
Type Your Tax Question Here...
Megan C is online now
A new question is answered every 9 seconds

My friend wants to open a Martial Art School. What kind of

This answer was rated:

My friend wants to open a Martial Art School. What kind of tax entity is good for him?
LLC or S Corp? Can he open it as a Non Profit Organization?

Thank you.

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you?

Megan C :

First things first, in order to be a nonprofit you have to be serving the public in a certain way, and none of the profits can be allocated back to your friend who is opening up the business

Megan C :

He can pay himself a reasonable salary from the nonprofit, but that's it

Megan C :

The best legal entity for a small business is the S corp, because you limit the self employment taxes you are responsible for.

Megan C :

You pay yourself a reasonable salary, and that's where employment taxes are allocated. The rest of your profit is only subject to income tax

Megan C :

You can form an LLC and elect to be taxed as an S Corporation - so you would have the benefits of the ease of forming an LLC under state law, but the tax benefits of an S Corp

Megan C :

So I would either form an S Corp or form an LLC and elect to be taxed as an S Corp

Megan C :

It's important to file your taxes each year, even if you have no activity because there is a monthly penalty for not filing your S Corp return

Megan C :

Do you have any further questions?

Megan C :

Please reply with any further questions, and if no further questions please rate as "excellent" so that I may receive credit for assisting you today

Megan C and 2 other Tax Specialists are ready to help you