Which Structure is Right for Your Business
cheap Canada Goose Corporations and limited liability companies (“LLCs”) are preferred business structures because, unlike sole proprietorships and partnerships, Canada Goose sale both offer liability protection. This means that the owner of a company cannot Canada Goose Outlet be held personally responsible for the company’s debts. The personal assets of an owner are shielded from company liabilities. cheap Canada Goose
canada goose deals In researching the various business structures, one inevitably comes across the S corporation. S corps and LLCs are similar in that they are both “pass through” entities for tax purposes; the income of these companies are passed through to their owners and reported on the owners’ personal income tax returns, thereby eliminating the double taxation incurred by owners of a standard corporation, or C corporation. (With a C corporation, the net business income is subject to corporate income tax, and the monies remaining after the corporate income tax are taxed a second time when they are distributed as dividends to its owners who must then pay personal income tax.) canada goose deals
canada goose coats on sale So what is the difference between an S corporation and an Canada Goose Jackets LLC? And which structure is right for you? canada goose coats on sale
canadian goose jacket The answer depends on your own unique situation. If operational ease and flexibility are important to you, an LLC is a good choice. An S corporation can have uk canada goose outlet no more than 75 shareholders. None of the shareholders can be nonresident uk canada goose aliens. And shareholders cannot be other corporations or canada goose coats on sale LLCs. canadian goose jacket
Canada Goose Jackets An S corporation is operated in the same way as a traditional C corp. An S corp. must follow the same formalities and record keeping procedures. The directors or officers of an S corp. manage the company. And an S corp has no flexibility in how profits are split up amongst its owners. The profits must be distributed according to the ratio of stock ownership, even if the owners may otherwise feel it is more equitable to distribute the profits differently. Canada Goose Jackets
buy canada goose jacket cheap LLCs offer greater flexibility in ownership and canada goose uk outlet ease of operation. There are no restrictions on the ownership buy canada goose jacket cheap of an LLC. An LLC is simpler to operate because it is not subject to the formalities by which S corps must abide. An LLC can be member managed, meaning that the owners run the company; or it can be manager managed, with responsibility delegated to canada goose managers who may or Canada Goose online may not be owners in the LLC. buy canada goose jacket cheap
And the owners of an LLC can distribute profits in the manner they see fit.
Canada Goose Parka Let’s say, for example, you and a partner own an LLC. Your partner contributed $40,000 for capital. You only contributed $10,000 but canada goose factory sale you perform 90% of the work. The two of you decide that, in the interest of fairness, you will each share the Canada Goose Coats On Sale profits 50/50. As an LLC you could do that; with an S corporation, however, you could only take 20% of the profits while your partner would take the other 80%. Canada Goose Parka
Employment Tax: Savings vs. Paperwork
canada goose clearance sale A major factor that differentiates an S corporation from an LLC is the employment tax that is paid on earnings. The cheap Canada Goose owner of an LLC is considered to be self employed and, as such, must pay a “self employment tax” of 15.3% which goes toward social security and Medicare. The entire net income of the business is subject to self employment tax. canada goose clearance sale
Canada Goose sale In an S corporation, only the salary paid to the employee owner is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. Therefore, there is the potential to realize substantial employment tax savings. Case in point: Canada Goose sale
Mary owns a print shop. In keeping with the industry standard, Mary decides that a reasonable salary for a canada goose uk shop print Canada Goose Online shop manager is $35,000 and pays herself accordingly. Mary’s total earnings for the year are $60,000: $35,000 paid in salary and the remaining $25,000 paid canadian goose jacket as a distribution from the S corp. Mary’s total employment tax is $5,355 (15.3% of $35,000).
canada goose store If Mary were the owner of an LLC, she would have to pay employment tax on the entire $60,000, equaling $9,180. But as an S corporation, she realizes savings of $3,825 in employment tax. canada goose store
One might assume that these savings could be further manipulated by reducing the salary to an extremely low amount and attributing the rest of one’s earnings to distributions but this would be an incorrect assumption. In practice, the IRS is careful to notice whether a salary is reasonable by industry standards. If canada goose black friday sale it determines a salary to be unreasonable, the IRS will not hesitate to reclassify distributions as salary.
canada goose black friday sale Still, while the potential employment tax savings may make the S corporation an attractive structure for your business, canada goose clearance canada goose outlet bear in mind that you would then have to deal with all the paperwork associated with payroll tax. The payroll tax is a pay as you go tax that must be paid to the IRS regularly throughout the year time, or you will incur interest and penalties. The paperwork alone can be an overwhelming task for someone who is not canada goose store familiar with this; and if you expect to incur losses or otherwise experience a cash flow crunch during the year that would hinder you from canada goose clearance sale paying the payroll tax when due, this could present a problem. canada goose black friday sale
Canada Goose online Owners of LLCs pay their self employment tax once a year on April 15 when income taxes are normally due. Income tax filings are also relatively easy for the owners of an LLC: A single member LLC files the same 1040 tax return and Schedule C as a sole proprietor; partners in an LLC file the same 1065 partnership tax return as do owners of traditional partnerships. Canada Goose online
Canada Goose Outlet The comparison chart below sums up the similarities and differences between the https://www.canadagoosejacketonlines.ca two business structures: Canada Goose Outlet
buy canada goose jacket The self employment tax rate for 2013 is 15.3% (12.4% for social security and 2.9% for Medicare). For self employment income earned in 2013, the self employment tax rate is 15.3%. The rate consists of cheap canada goose uk two parts: 12.4% for social security (old age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance). buy canada goose jacket
For 2013, only the first $113,700 of total net income is subject to the social security portion of the tax. canada goose uk black friday All of the the total net income is subject to the Medicare portion of the tax. (Source:
canada goose An LLC that is taxed as an S corp is still a limited liability company from a legal standpoint (subject to the laws governing limited liability companies in the state of formation); however, for tax purposes it is treated canada goose coats as an S corp. canada goose
canada goose clearance A word of caution: Certain nuances of S corp taxation can be confusing to some LLC owners, especially do it yourselfers and/or those who prepare their own tax returns; for example, an LLC owner might easily make the mistake of referring to an IRS publication that addresses LLCs when, in fact, such a publication would not apply to an LLC that is taxed as an S corp such an error could lead to negative tax consequences. It is therefore highly recommended that you consult a CPA or other qualified tax professional for advice and/or assistance canada goose clearance.