TL;DR Accounting

How Does An S-Corporation Save Me Money?

20

Dec

LLC, PLLC, Private Practice, S-Corp, Taxes

How Does An S-Corporation Save Me Money?

If you have read our post about S-Corporations and determining a reasonable salary, you’re probably wondering how S-Corps help save you money. Because it’s a requirement to pay yourself a reasonable salary when operating an S-Corp, savings on your taxes comes into play when your reasonable salary is more than your net income. This lets you take a distribution. Distributions are amounts of cash that you can take out of your business. Distributions are not subject to payroll taxes so by taking a distribution, you save by not paying payroll taxes on that amount of money. When told about this,…

What is an EIN and Why Do I Need One?

An EIN is a nine-digit number assigned by the IRS and used to identify your business. It’s like a Social Security number for your business and, in many cases, can be used in place of your Social Security number on forms and other types of paperwork. We recommend that all businesses apply for and use an EIN.. If you are a sole proprietor, you need an EIN if you have any of the following: Employees A retirement plan, Have or are planning to buy an existing business You are a partnership, LLC, or PLLC In addition, some states require you…

How much should I pay myself?

It depends. No, really — it does. I ask each client a handful of questions when trying to determine how much they should compensate themselves: What industry are you in? How much work do you do? Do you have any employees? How much money are you currently making? Are you a PLLC or LLC? Are you an S-Corp? (The below information does not apply to S-Corps because S-Corps require a reasonable compensation.) Generally, I’ll look into your records and cash flow to help determine your salary. However, the following chart works well as a general outline to determine your compensation,…