💡Choosing the right entity can save you thousands in taxes.
✅LLCs and S-Corps provide limited liability protection to the owners.
💰LLCs are subject to self-employment tax on all profits, while S-Corps can reduce self-employment taxes by paying a reasonable salary.
📝LLCs are simpler to set up and maintain compared to S-Corps.
🗓To choose the right entity, consider factors such as your business's goals, profits, and legal obligations.
What is the main difference between an LLC and an S-Corp?
—The main difference is how they are taxed. LLCs are subject to self-employment tax on all profits, while S-Corps can reduce self-employment taxes by paying a reasonable salary.
Do I need to hire an attorney to form an LLC or S-Corp?
—While it is not required, it is recommended to consult with a professional, such as a lawyer or CPA, to understand the legal and tax implications of each entity type.
Can I switch from an LLC to an S-Corp or vice versa?
—Yes, it is possible to convert from one entity type to another. However, it is important to consult with a professional to ensure a smooth transition and to understand any tax implications.
What are the compliance requirements for an S-Corp?
—Some of the compliance requirements for an S-Corp include having no more than 100 shareholders, being a U.S. company, and having only one class of stock.
Which entity type is best for a small business?
—The best entity type for a small business depends on various factors, such as the business's goals, profits, and legal obligations. It is recommended to consult with a professional to determine the most suitable entity type for your specific situation.
00:00Learn about the differences between LLCs and S-Corps, and how choosing the right entity can save you thousands in taxes.
03:02LLCs provide limited liability protection to the owners and are subject to self-employment tax on all profits.
05:36S-Corps can reduce self-employment taxes by paying a reasonable salary and are required to file appropriate IRS forms.
09:18Consider factors like your business's goals, profits, and legal obligations when choosing between an LLC and an S-Corp.
