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What tax structure is best for me?

Should I be a Stock Held Corporation or a LLC, Limited Liability Corporation?

Stock Held Corporation is either taxed as a C-Corp, 1120 Form or an S-Corp, 1120-S Form.

LLC's, are much more flexible. Not only do they have the added protection of charging order, but they can receive the election of taxation 4 different ways.

LLC's can be taxed as a flow through to an individual or Corporation as a Disregarded Entity (no tax return necessary).

They can be taxed as a Partnership, 1065 Form.

They can also be taxed as a C-Corp 1120 Form, or a Sub Chapter S Form 1120S.

A LLC may be taxed any way you decide is the best tax structure for your purposes. We advise our clients to use an LLC when ever possible.

C-Corp 1120 Form

The Advantages of 1120 Form // C- Corp

You may keep owners off tax return. You will need 3 or more Stockholders or Members.

You may take a 100% Deduction on Medical Insurance.

Corporation can own Property (land, car, boats, planes, etc.) and depreciate it or take as full deduction.

Corporation can pay for business trips. Full deduction

$50,000.00 or under on profit is taxed at 15%

Can have a different tax year end. This is important when your managing money and can be a big help at tax time.

We feel this is the best structure to maintain privacy for the owners of a corporation.

The Disadvantages of 1120 Form // C- Corp

Double Taxation: If you are to take money personally you must be paid a salary or 1099. If you pay a dividend then the company must pay taxes as profit and individuals must pay taxes as income.

Profit over $100,000.00 is taxed at 39%

Sub-Chapter S 1120S Form

This is a flow through to an Individual and is the best vehicle to pay yourself from. If you live in another state (most of you do) this is the best way to control your income. You get to decide how much salary you are going to pay yourself. Thus you control how much State income tax you are going to pay the state your in.

Salary is a 100% deduction.

Sub Chapter S Corporations can own Property (land, cars, boats, planes, etc.) these can be depreciated. Maintenance can be taken as a deduction.

If you sell a Property (land, cars, boats, planes, etc.) and make money on that property, (Capital Gains) there is a 15% cap on the taxes you pay and can be as low as 5%, depending on the amount of Capital Gains.

Sub Chapter S Corporations can pay for business trips. Full deduction.

Medical Insurance must be deducted from the individual’s tax return.

Sub Chapter S Corporations can take all normal expenses, pay salary and stock holders can take distributions. Distribution is the monies the company has left over at the end of the year. Everyone must pay Basic Federal Taxes but not everyone would have to pay taxes to the state they are in nor the Social Security and Medicare. Such structures can save a lot of money.

You can have one Stockholder if you like, or up to 75 people if you like.

Sub Chapter S Corporations must have a December year end.

Sub Chapter S Elections are easiest to obtain with a Stock Held Corporation.

The 2553 must be filed within 75 days of forming the company or in the first 3 months of the year.

Disadvantages Sub-Chapter S // 1120S Form

You lose your privacy and are named in the 2553 to the IRS. Your name is on public record with the Secretary Of State. (If you chose the Deluxe package -Extra level Privacy, we can use your Nevada address and make it harder for anybody to identify you from the public records.)

Partnerships, 1065 Form

This is the natural default of a LLC, this is how the IRS commonly recognizes a LLC. This is a flow through to the members in an LLC and commonly considered the best vehicle for holding property.

Partnerships, 1065 Form can own Property (land, cars, boats, planes, ect.) and these can be depreciated. Maintenance can be taken as a deduction. These deductions can be a flow through to you and your other members.
If you sell a Property (land, cars, boats, planes, ect.) and make money on that property, (Capital Gains) there is a 15% cap on the taxes you pay and can be as low as 5%, depending on the amount of Capital Gains.