What are your business entity structuring options?

• Sole Proprietorship: Income and expenses from the business are reported as your personal income, and all profits are subject to self-employment taxes. 
• Partnership: Similar to sole proprietorships, partnerships don’t pay taxes at the business level. Instead, profits and losses are passed through to partners who report them on their personal tax returns. Each partner pays taxes on their share of the net profit of the partnership, subject to self-employment taxes.
• Corporation (C-Corp): C-corps are taxed at the corporate level, and any dividends paid to shareholders are taxed again at the individual level (double taxation). However, they benefit from being able to retain profits within the company at a possibly lower corporate tax rate.
• S Corporation (S-Corp): S-corps are pass-through entities like partnerships and sole proprietorship. They avoid the double taxation of C-corps as profits and losses are passed through to shareholders’ personal tax returns. However, S-corps have strict eligibility criteria and require regular compliance in terms of corporate formalities.
• Limited Liability Company (LLC): An LLC offers flexibility; it can be taxed as a sole proprietorship, partnership, or corporation (S-Corp or C-Corp). The default is a pass-through entity, avoiding double taxation while providing liability protection. This makes LLCs popular for small to medium-sized businesses.

What advantages does strategic structuring give?

• Reduced self-employment taxes: S-corp owners can split their income between salary and dividends. The salary is subject to self-employment taxes (Social Security and Medicare), but dividends are not. This allows for potential tax savings on the portion of income taken as dividends, which isn’t subject to self-employment taxes. 
• Employee Benefits: S-corps can offer certain benefits like health insurance and retirement plans, and the company can deduct these costs. When such benefits are provided to shareholder-employees, they are not considered taxable fringe benefits.

Confidently structure your business to minimize what you owe in taxes as a small business owner.

Harsin Advanced Tax Planning has decades of experience guiding entrepreneurs to make smart tax decisions.

How Can We Help You Navigate Tax Write Offs as an Entrepreneur?

Hear It From Our Client