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109

You pretty much have it straight. In the first case, for 2017, She would have to pay 12.4% (social security) on 127,200 of salary and 2.9% (medicare) on the full amount. That would be $15,772, and $5,800 for a total of $21,572. In the second case, she would pay at total of $15,300. In the case you cite there is pretty much no downside to achieve the ~$6,...


33

The best partnership agreements cover all contingencies often referred to as the 5 D's: death, divorce, drugs, disinterest, and disability. Most do not, however, which makes them such a mess. I was an employee of a firm that went through this, and it is not pleasant from anyone's perspective. Of course you don't have that option now. Your best bet ...


28

Did he say why he wants double your asking price? Did you explain to him how you came up with the offer you made? Sometimes exploring interests (why people make their decisions) is more helpful than bargaining over positions. If you understand why he wants double your offer (and he understands why you're offering a lower price) you might get closer to an ...


24

Many partnership agreements include a shotgun clause: one person sets a price, the other can either buy at that price or sell at it. It's rather brutal. You can make offers that you know are less than the company is worth if you're sure the other person will have to take that money from you, say if you know they can't run the company without you. He has ...


15

The answer depends on this: If you had to hire someone to do what you are doing in the S-corp, what would you pay them? If you are doing semi-unskilled work part-time, then $20k might be reasonable. If you are a professional working full time, it's too low. Don't forget that, in addition to "billable" work, you are also doing office tasks, such as ...


6

Payroll taxes are only paid on salary, so you will be paying SS Tax and Medicare only on the $60,000 you pay yourself. You will still pay income tax on the distribution, of course, but the payroll tax savings seem significant (~$13K according to the calculator below). While tinkering with a new web technology some time ago, I created this JsFiddle ...


6

S-Corp is a corporation. I.e.: you add a "Inc." or "Corp." to the name or something of that kind. "S" denotes a specific tax treatment which may change during the lifetime of the corporation. It doesn't refer to a legal status.


6

On the surface I agree with the previous responses, however, since you are for tax purposes an employee, some states will require to you to carry workman's compensation insurance, and unemployment insurance (state & federal). In addition, there could be a higher income tax rate of the IRS believes you are a personal service corporation. Something not ...


5

FICA/SE taxes are not 30%. They are at most ~15%, including the employer portion. Employer also pays FUTA tax, and has additional payroll expenses (like fees and worker compensation insurance). The employee's FICA portion is limited up to a certain level of earnings (110100 this year, IIRC). Above it you only pay medicare taxes, not social security. S-Corp ...


5

There are no dividends from S-Corp. There are distributions. Big difference. S-Corps fill form 1120S and schedule K-1 per shareholder. In the schedule all the income of your S-Corp will be assigned to various categories that you will later copy to your personal tax return as your personal income. It is not dividend income. The reason people prefer to take ...


5

Subchapter S Corporations are a special type of corporation; the difference is how they are taxed, not how they relate to their vendors or customers. As a result, they are named the same way as any other corporation. The rules on names of corporations vary by state. "Corporation" and "Incorporated" (and their abbreviations) are allowed by every state, but ...


5

You can make a capital contribution, not a loan. It's not a taxable event, no interest, and you can take a distribution later when the business has the money to pay you back. So yes, transfer the money. If you use software like Quickbooks, make use of unique accounts for tracking the contribution


5

In fact: does JoeCorp have to pay "payroll taxes" on that?? Yes. Any shareholder of an S-Corp with greater than 2% ownership must take reasonable compensation from the S-Corp as a W-2 employee, and payroll taxes apply as they would with any employee. The tax-savings of an S-Corp come from not having to pay payroll/self-employment taxes on the distributions ...


4

No, you cannot. Investment is not a tax-deductible expense.


4

No, the deadline is for existing LLC/C-Corp to chose to be taxed as a S-Corp for the tax year 2013. You haven't form a corporation at all, so its irrelevant for you. Once you do form your corporation (i.e.: file the relevant documents with your State agency responsible - Secretary of State/Department of Corporations etc), you have 75 days to have the ...


4

These are all factually correct claims. S-Corporation is a pass-through entity, so whatever gain you have on the corporate level - is passed to the shareholders. If your S-Corp has capital gains - you'll get your pro-rata share of the capital gains. Interest? The same. Dividends? You get it on your K-1. Earned income? Taxed as such to you. I.e.: whether you ...


4

That's really not something that can be answered based on the information provided. There are a lot of factors involved: type of income, your wife's tax bracket, the split between Federal and State (if you're in a high bracket in a high income-tax rate State - it may even be more than 50%), etc etc. The fact that your wife didn't withdraw the money is ...


4

The difference between the two is subtle, and it a complicated mix of corporate law and taxes. Company Types First, let's talk about a company without going into taxes at all. A company is something that exists under state law. People like to refer to it as corporate personhood. State laws provide the basis for creating companies. There are different ...


4

Business expenses (deductions) offset business income, so no matter which type of pass-through business entity she is using (Sole proprietorship,LLC,S-Corp,Partnership), the expenses will offset her business revenue. She's taxed on the profit from her business, not the revenue. In both cases, she only has $99,000 in business income reported in the income ...


3

Generally if you're a sole S-Corp employee - it is hard to explain how the S-Corp earned more money than your work is worth. So it is reasonable that all the S-Corp profits would be pouring into your salary. Especially when the amounts are below the FICA SS limits when separating salary and distributions are a clear sign of FICA tax evasion. So while it is ...


3

If you're creating an S-Corp for consulting services that you personally are going to provide, what would it give her to have 50% of the corporation when you're dead? Not to mention that you can just add it to your will that the corporation stock will go to her, and it will be much better (IMHO, talk to a professional) since she'll be getting stepped-up ...


3

This may not exactly answer your question but, as a small business owner, I would highly recommend having a professional handle your taxes. It is worth the money to have it done correctly rather than doing something wrong and getting audited or worse having penalties assessed and owing more than you thought would be possible. I would recommend this ...


3

When in doubt, you should always seek the advice of a professional tax preparer or your accountant. (Many agents/accountants will gladly review your tax preparations to ensure you haven't missed something. That's quicker and cheaper than paying them to do it all.) Having said that... This Illinois resource has detailed information about S-corps: Of ...


3

That is correct, the SS cap is on total wages, not each wage. When you create an LLC (as a disregarded entity), you don't pay yourself with a W2, all the LLC earnings are your earnings. So instead of Social Security deductions, you will be paying Self-Employement Tax (which totals to the same amount as you would be paying with W2 to yourself, just under ...


3

"I don't know if it's common or necessary to include capital stock as a liability?" Yes, if you look at the title of the nonasset part of the balance sheet it actually is titled "Liabilities and Shareholders' Equity". Your capital stock is a component of Equity. This sounds like it was reported in a reasonable manner. "$2,582 listed under Loans from ...


3

I'm not sure what you mean by "writing off your time," but to answer your questions: Remember that, essentially, you are a salaried employee of a corporation. So if you are spending time at your job, even if you are not billing anything to a client, you are earning your salary. If there are costs involved with these activities (maybe class fees, a book ...


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