Hey all,
i ve gotten a boatload of great information here on this board regarding real estate. Now I dont know where to turn to short of visiting my CPA. which is going to be costly. what im looking for is folks with real life stories/examples/advice.
ok i am a general contractor. i wish to start an s-corporation or LLC. I have no employees, officially at this moment anyhow. Can anyone help, which of the 2 am i better off with? I am a small peanuts business at this time but who knows it may take off one day.
here is what i do know. s-corp is a pass thru entity. taxes are paid on 4-15 every year along with my taxes. LLC same except not so formal/strict. seems like llc is less redtape. HELP
if you had/have a corrp now id like to know if you have any regrets with your form of corp. thanks in advance
In an LLC you will almost always pay less taxes.
You get the benefit of a partnership with the liability protection of a corporation.
I'm a General Contractor in CA as well. I hold my business in an S Corp. This is because of the pass through structure on taxes. If you are a single employee (you) company, it is the best way to go. You will still have to pay state taxes every year in CA, which is $800 min. on corporations, but that's about it.
Setting up the S Corp is an important step, but maintaining it is even more important. Make sure to stay on top of your paperwork and don't co mingle funds. Laughlin Group is a good company to handle your paperwork compliance the first year. Once you learn the ropes, you can do it yourself.
Thank you all for your comments so far. Brian your business situation is the most like mine. I have been researching for a while. It appears that in CA there cannot be a single member LLC. there are work arounds for it. it is said that LLCs must pay taxes on profits whether or not they are distributed or salaried out. LLC seems the easier way to go. is it true with s corp you pay taxes only on profit leftover after paying all responsibilites? i wonder if the hassle of payroll and paying out quarterly taxes is worth it with s corp...bottom line is im lookin to cover my assets and have the best tax breaks and keep more money available for the business. like i said i am starting out small peanuts and plan on 1099'ing the help. Brian any help will be greatly appreciated. thanks Robert
An S Corp is only taxed once. I don't pay quarterly either because on paper, I don't show a profit which is the point of having any type of Corp: to avoid tax liability. You have to pay yourself a reasonable salary and then you can take the rest as a stock distribution or dividend. I use mine to run ALL my expenses through including business trips to purchase/evaluate real estate. An S Corp does not have the flexibility of an LLC and is narrow but since you are a single employee/owner that is exactly what you want. If your company grows down the line, you can convert to a C Corp or LLC.
As an aside, CA chartered corporations are not the most bullet proof in the world regardless of entity selection. Make sure you have adequate insurance (2M) to cover your *** and stay on top of your paper work (resolutions, minutes, etc.). Otherwise your veil can be pierced pretty easily.
C-Corp is different and you'd run into double taxation on the profit you leave in the corp.
You can have a single member LLC, I have two of them with no problems.
Steve, the single member LLC's you mentioned, are they real estate holding LLC's or a business LLC?
From my understanding, anyone that does not have taxes withheld is supposed to pay them quarterly. These are estimated taxes, so if you don't have earning per se, then there are no estimated taxes to pay. I have a CPA do my stuff for me but I never send in paper work short of signing my year end return. I run most stuff off Quick Books which lets me send a file to my accountant for him to work with. Easy.
Like I said earlier, if you are nervous about maintenance you should look into hiring a paperwork assistance company. Laughlin Group in Reno is the one I've used. They can even form the entity for you as well although they are little more expensive. The maintenance program will run you about $500 for the year and you will learn everything you need to do. Plus after a year, you don't really have many more resolutions, etc., to deal with as it is.