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Need some advice on an S-Corp vs a LLC. I have a small

Need some advice on...

Need some advice on an S-Corp vs a LLC. I have a small business. I do not have any employees and will not need to hire anyone in the future. Will hire contract labor first. Need an easy way to pay myself and pay the employment taxes every quarter. Estimated taxes will work.

Accountant's Assistant: Can you tell me what state the LLC is registered in?

CA

Accountant's Assistant: Has anything been filed or reported?

Yes I have already set up a corp and filing as an S-Corp but thinking that I should really by an LLC>

Accountant's Assistant: Anything else you want the lawyer to know before I connect you?

Most of my income will be from the stock market and a small business.

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Answered in 3 minutes by:
3/13/2018
Chad EA, CFP ®
Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Tax
Satisfied Customers: 2,162
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
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Hello!

My name is***** will assist you today.

Please give me one moment while I review your question and type my initial response

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To assist you further what type of small business will you operate?

Additionally, given your sole ownership and no need for employees, I generally suggest maintaining an LLC until your business net profit is $30,000 or more, not including your stock trading.

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Customer reply replied 1 month ago
I have a photography business and sell my photos as greeting cards, matted photos, grocery bags and anything else that looks fun. Also knit hats and have sold quite a few but only in the winter in California does it work well. It give me something to do in the winter unless I can travel to warmer climates

As an LLC all the profits and deductions will flow through your business to your personal return. Your net profits will be subject to self employment tax.

As a S Corp the profits and deductions will also flow through to your personal return. Except, any amount of profit that you realized above your "reasonable compensation," is not subject to employment tax.

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You business has a lot of interesting activities.

If your overall net profit is less than $30,000 then I would recommend remaining a LLC with no S Corp election.

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Customer reply replied 1 month ago
Reasonable sounds like it can only be $2,500 per quarter is that correct?
Customer reply replied 1 month ago
But my investments have already exceeded that this year..... but you said just the small business so I am still good with a LLC right?

"reasonable compensation," is the term the IRS uses for how a S Corp shareholder/employee must pay themselves.

It is the duty of the tax payer to justify what they are paying themselves is justifiable. Generally, this is done via comparison of salaries for other similar workers in the industry or what you would pay someone else to do the same job you are doing.

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Yes, the investment income is separate because that income is short term or long term capital gains. I am only speaking about your small business activity.

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Customer reply replied 1 month ago
I don't really pay myself from that business so far. So will be living off the trading account. Will that be a red flag?

Not if you remained only an LLC. If you elect to be taxed as a S Corp then you will have to pay yourself something.

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Customer reply replied 1 month ago
ok that works. Do I need to do estimated taxes for the short time trading profits?

Yes, you should pay estimated taxes if your tax liability will be greater than $1,000 at the end of the year

Chad EA, CFP ®
Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Tax
Satisfied Customers: 2,162
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