Stop creating LLC’s!!!!!
Recently, I’ve encountered A LOT of business owners who have – WRONGLY – opted to create an LLC instead of an S-Corp.
If my IG feed is any indication, it’s because that’s what the social media “business gurus” are pumping into our brains.
But it’s the WRONG one.
Here’s why in as simplest terms as I can get them.
YOU WILL PAY AN EXTRA ~15% IN TAXES AS AN LLC!
That’s it.
If your business makes $100,000, just chop off an extra $15,000 and hand it over to Uncle Sam.
In an LLC, you pay ~15% in payroll taxes on EVERYTHING your business makes.
“Payroll taxes” aka
“employment taxes” aka
“self-employment taxes” aka
“FICA & Medicare Taxes” aka
“Social Security & Medicare Taxes”
It’s all the same tax by a different name.
However, it does NOT work that way in an S-Corp.
With an S-Corp, you pay the ~15% payroll tax on anything you pay YOURSELF as an employee.
And any profit that’s left over is a Shareholder Distribution and shareholder distributions (aka dividends) don’t pay the payroll tax.
Please share this with anyone you know even DAYDREAMING about starting a business.
The more we spread the word, the more we save business owners from paying taxes needlessly.
(BTW if you’re a 1099 contractor, you’re also paying payroll tax. You should also consider opening an S-Corp.)
DISCLAIMER: Educational Purposes Only. Consult your financial and tax advisors before deciding on your business entity.
