No one should worry about s corps or llc until your buisness turns profit or you need a legal entity for payment processor it's just a way of lowering personal liability and you can file the paperwork at through your state and state website save money.
Starting an LLC or S Corp after reaching profitability or needing liability protection is sensible, but early formation has benefits too. An LLC offers liability coverage and simpler management, while an S Corp can lower self-employment taxes for higher income. Consulting a professional ensures you choose the best fit as your business grows.
Using pre-tax contributions in an LLC or S Corp can reduce taxable income during high-earning years, while post-tax contributions like Roth options can ease taxes in retirement, creating a balanced tax strategy.
My CFA Julianne Iwersen Niemann, a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
Thank you for sharing, I must say, Julianne appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive.
Also... is GREAT to have a CPA making a video on the subject... Seemed like attorneys had taken over tax related videos... just to end up suggesting trusts, holding companies, series LLC's... and the "words" Wyoming, Delaware, Nevada, anonaminity.... for us regular folks with our hustles that just want to make some sort of reasonable living.
The best explanation yet! The only thing I didn’t see you explain was retained earnings and how they are taxed differently and how a different structure(c corp) can reduce tax on retained earnings.
No tax on retained earnings unless distributed (as dividends) from c-corp. All others, no tax on distributions as it has already been taxed and owner has simply decided to leave that cash in the entity.
Great explaining these different business entities and how the tax implications can impact you. Best video I've seen so far. Definitely wanna check out your course.
The financial system has been artificially pumped for over a decade to ensure big pockets were lined; and now those same hands will make a fortune in the largest transfer of wealth in human history by shorting it on the way down. Inflation does have a roll, but that's to keep everyone panicked, and focused on their bills and expenses, rather than focus on the capital crimes of politicians and corporations,I'm still at a crossroads deciding if to liquidate my $338k stock portfolio, what’s the best way to take advantage of this bear market??
Find stocks with yields that exceed the market and stocks that, at the very least, follow the long-term market trend. However, you should get guidance from a financial advisor if you want to create a successful long-term plan
I agree, I've been in constant touch with an Investment advisor for approximately 17 months. These days, it's really easy to buy into trending stocks, but the task is determining when to sell or hold. That's where my advisor comes in, to help me with entry and exit points , I've accrued over $337k from an initially stagnant reserve of $148K all within 18 months...
Mine's REBECCA NOBLETT ROBERTS. She turned out to be better and smarter than all the advisors I ever worked with till date, I’ve never met anyone with as much conviction.
Tax laws can be so complex, and it’s super helpful to break them down like this. Understanding how different policies can impact our finances is crucial for making informed decisions.
Making profitable investments during this time of political change can be risky without that insight. For me, working with an adviser is the best first step to navigate these complexities and make informed choices.
I think having an investment advisor is the way to go. I've been with one because I lack the expertise for the market. I made over $490K during the recent dip, highlighting that there's more to the market than we average folks know.
@NaviMarajCPA you mentioned the associated taxes when taking a dividend from the C-Corp, but you did not mention how would the distribution from the S-Corp would be taxed, assuming John does not want to leave $60K in the company's account.
@@misterj3133 So if John took $40K salary and $60K dividend taxes would be the same as the LLC, right? This is the real "apples-to-apples' comparison. Of course taxes are lower if you get $0K vs $100k. I guess I'm not really sure what the true benefit of an Scorp is.
@@misterj3133 the tax is already paid, whether he distributes it or not. So, any distribution from an s-corp is "tax-free" at that time. The tax has already been paid.
@@SuspiciousAccountBeepBoop The true benefit of the s-corp is that payroll/self employment taxes are paid on the w2 earnings only...not anything retained. The retained earnings are taxed at individual rate. If in the LLC, the full 100k pays individual rate + self-employment (i.e. payroll taxes).
It's honestly all water under the bridge. All those fees just count as deductions anyways. If your business is making good money you will be looking for any and all ways to spend money on for the business to reduce your net profits.
Great video! Currently have a S Corp will convert to a C Corp soon. Then open another C Corp for another industry. I was told that its less hassle to get a loan with a C Corp vs S Corp if need be.
Thank you so much, the best video I have ever watched that answered all my questions regarding the taxation rules on different types of entities. It helped me convert my LLC to an S-Corp and save on taxes. God bless you!
Regarding the Sole Proprietor tax, if the business profit is $1,000,000, do we still use the same formula to calculate the social security and Medicare taxes? For example: $1,000,000 x 0.153 = $153,000.
They are taxed as ordinary income (same as a w2 wage) for LLCs, & S-corps, which is why they call them pass-thru. You don’t have to file a separate tax return for the entity. It’s just another line item of Income on your Fed 1040 (from your schedule C/business). But if your business expenses (including assets purchased and depreciation, etc) exceed your income, then you have a Net Loss and it is a Negative Number in your Income column, thereby reducing any other type of income (such as dividends, W2, pensions, etc). My understanding of it. Not tax or financial advice.
@@AscDrew No. There are separate tax returns for a multi-member LLC, S Corp and C-Corp....which issue the K1 which flows to your personal tax return. Pass-thru entities file returns but do not pay taxes. C-corps file returns AND pay taxes. Not tax advice, but accurate.
you can keep it with no extra tax. if you use it for the business then the business "owes" you that money. sometime down the line you can just take it with no tax. i know from experience . your company is profitable but you need to leave the money in the business. it becomes a capital investment in the company. in the future if you take the money you write yourself a check from the business account and it is just a drawing against the capital investment . so you are just taking your money back.
Love the video. But what about the potential benefit for section 1202 $10 million capital gain exclusion when selling the company? Please create a follow up video to discuss this
When comparing total taxes between Sole Prop and S Corp in Tennessee, the disparity isn't significant. Although S Corporations can potentially save on Social Security and Medicare taxes, they are required to file and pay Franchise and Excise taxes. The Excise tax amounts to 6.5% of net income, and the Franchise tax is 0.25% of the greater net worth or tangible property in Tennessee. In this case, Sole Prop may pay roughly $8,000 more in Social Security and Medicare taxes, whereas S Corp pay a similar amount for Franchise and Excise taxes. However, it's important to note that while Social Security and Medicare taxes contribute to your SSA benefits, Franchise and Excise taxes are not recoverable.
I wonder what the math is though?. Later in life, the average American is only getting 42% to 28% of what you put into fica. I wonder if losing 6% while being aggressive in personal investing beats fica benefits? The people that start LLC, s Corp etc are middle and upper middle class mostly.
A C-Corp does not pay social security or medicare taxes UNLESS they have employees or unless the owners take draws (which looks like a salary payment). Also... a capital gain only happens when the business (or some of it's property) gets sold. Bottom line.... A C-Corp pays it's own taxes. S-Corps pass on their tax liability or losses to their owners and are therefore taxed at the owners' personal tax rate. Don't be a sole proprietor. Also be a sole C-Corporation OWNER if the company is profitable. If the company is not profitable, then it pays no taxes but the owners don't get credit for the company losses. Do S-Corp if the company is NOT profitable (yet). Choose WHO gets taxed (you or the company) depending on which results in a lower overall tax burden. If you have multiple owners, the same things apply, but are more complicated. Owning a business is MOSTLY better. (I'm not a CPA, but I've run businesses my whole adult life).
@@AscDrew Better to discuss that with an accountant for your situation.... but all expenses are deductible from revenue (the result is a profit or loss) which determines taxable income. SS and Medicare (if paid) are business expenses. So one can only consider an actual paid expense as actual expense. You can't deduct an expense you didn't incur. (If I'm wrong, I want to know!) Also I don't like the term "write-off" as it presumes something that is not true. So called "write-offs" are simply business-related expenses that reduce taxable income. Basically all business expenses, including payroll and related expenditures. But remember that business expenses for one business are revenue to another. That's why the system works. Somebody eventually earns an income and pays tax on it. Meanwhile, the whole chain of cash flow has employed people, etc.
This is great but will have to rewatch this video at least 2 more times. Omg my head hurts after listening to all those numbers lol. Great information nevertheless. Got yourself a follow
A MMLLC can elect to be taxed as an S-Corp. Would be nice to see a column with those numbers although I image it would be the same as the S-Corp column. Just so its understood that there are other options for MMLLCs.
I have a question. Considering personal cash flow the sole prop and general part, the individual gets taxed at a personal level and they get those funds. And a C-corp the owner takes a salary and the C-corp gets taxed on the $60m and if the owner wants those funds the need to take a distribution, they can't just pulled money from the register like a sole prop and gen part can do. But what you don't show is, how does the S-corp treat the $60m that was taxed on the corp level? Don't they have to take a distribution also? And they don't get taxed then, correct? And if so, can't they skip the salary and take a distribution instead? I work at a bank and I see a lot of S-corps and this seems to be the norm.
The s-corp does not pay tax on the 60k. It flows to the personal 1040 via Form K-1. Any s-corp distributions would be "tax free" because the taxes were already paid when filing the 1040. They do not have to take a distribution...it can stay in the business for any reason. Can't skip the salary...you must have a "reasonable" salary.
The big problem with the Corp S is that on a personal level it affects you a lot, since it distributes dividends or not, you must pay for them in your personal taxes and your health insurance skyrockets among other things
My questions is a c corp has a profit of 50k the owners do not want to drawn that money from c corp still he has to pay I his tax return if 1099 div was issued ? Because he said if you want to delay the dividend tax for later , means u can leave alone the 50k and do not issue 1099div and they don’t need to be report it u til he takes that 50k im future year?
I have a SMLLC right now. As a reak estate professional, what would you recommend as my tax status be? Leave it as a Sole Proprietor, or S-corp or find another person and form a MMLLC/Partnership?
great video. Question: So if the S-Corp was to pay John the remainder of the $60k, the same math in column L would apply? Wouldn't that be apples to apples comparing to Sole Prop? Keeping the $ in S-corp isn't apples to apples vs. Sole Prop.? Am I missing something? What I am getting at is - who controls the funds in those scenarios. thank you!
you own the profits in an S corp. you can just take the 60k out of the bank or whatever with no extra tax. you have already paid the personal tax as an S corp. only trouble you can get into is the IRS can say you paid yourself too low a salary so you owe more fica taxes . social security max;'s out but the others don't. but you have to pay them as a S corp anyway.
Since sole corporation is a flow-through entity, do owners pay income taxes on distributions in addition to the federal income tax and how does it reflect on the balance sheet in the equity section?
They only pay payroll taxes on the $1. Their compensation package is likely tied to stock performance, etc. They might get stock optons, etc. Way to big a topic for this forum. Or, they dont need it and are keeping the money in the business to grow the business.
great explanation, I have a question, I am Canadian and I own a C-corp as I have a business in the USA, what happens to social security and Medicaid as I don't have status in the US
Can you revisit the benefits of having a C-Corp owned by your self-directed ROTH IRA or Solo 401K Single member LLC? C-Corp pays tax on EBIT and you can elect to have all of the after tax profit paid to your SD IRA’s (or Solo 401K) LLC. Qualified DIVIDENDS are passive income and therefore not taxable inside you Roth IRA
Very great explainer video. Easy to follow and understand. I would just suggest that you don’t keep the mouse on the cell’s figure while explaining. It prevents a continuous visual focus during the video.
That 60k stays in the business account and will not be subject to SE taxes since you aren’t claiming that as income. You still pay income tax on the 40k and 60k, only difference is not paying social security and Medicare on the 60k.
I'm curious about your s-corp numbers, specifically, the numbers related to the $60,000. I can't figure out how $60,000 results in the same numbers as the $40,000 in the s-corp column. I'm getting $3,720 for Social Security and $870 for medicare. Does the s-corp ONLY pay the same amount as what the employee has to pay without regard to the fact that it's $20,000 higher? In other words, does the s-corp only have to match the employee's social security and medicare contributions instead of paying the same percentages as the employee?
If you use a payroll company to deduct taxes what happens to the money they deduct does it get sent to the government right away or do you still have access to it ?
Would it be possible to do one for $1M profits? And with only the bare minimum amount of "Reasonable Compensation". Doesn't SS/Medicare have a cap of $200K? I am very curious to see if the lower 21% C-Corp tax would work better at much higher income levels.
ss caps out but medicare does not . medicare used to only be on salary then they changed it so medicare is on all the profit in S corp. ss does cap out currently but politicians are always yacking about making it on all income.
My wife and I are nurses. We work as self employed 1099. I could open a single member LLC and do S election. And they both work in the same LLC as an S corp. And that the 1099s are reported from both of them through the S Corp. Then the S corp generates w2 for each one and the dividends pass through K1 to the owner. Or each would have to open their own LLC and make S election. thanks
Don't C-Corps offer more tax deductions? If a C-Corp has more expenses strategically, cant they pay significantly less in taxes? Why would anyone elect to have any significant profit in a C-Corp or most business structures? Nonetheless, great video. Very informative!!! Ty.
max fed rate in a C corp is 21% max S corp fed rate is 37% . so it depends how profitable you are and what you want to do. to grow the business a C corp lets you reinvest more profits instead of paying them in taxes. also depends on the state and what you do. in ny if you manufacture then no state income tax which is a huge break if you are profitable.
Hi Navi, I rehab real estate multifamily properties for rental investments and just starting to develop apartment for-sale condos. I have come across CPAs and tax attorneys online that stated that I should form a C-Corp to avoid flagged as a dealer on my 1040 schedule, and get hit with up to 37% in federal taxes. They noted that rehab and development are active businesses. Is there any merit to their thesis to form an LLC taxes as c-Corp over an S Corp? (With my rehab rentals, I have been capitalizing most renovation / project costs and taking a salary albeit paying self-employment taxes.)
No one should worry about s corps or llc until your buisness turns profit or you need a legal entity for payment processor it's just a way of lowering personal liability and you can file the paperwork at through your state and state website save money.
Starting an LLC or S Corp after reaching profitability or needing liability protection is sensible, but early formation has benefits too. An LLC offers liability coverage and simpler management, while an S Corp can lower self-employment taxes for higher income. Consulting a professional ensures you choose the best fit as your business grows.
Using pre-tax contributions in an LLC or S Corp can reduce taxable income during high-earning years, while post-tax contributions like Roth options can ease taxes in retirement, creating a balanced tax strategy.
How can one find a verifiable financial planner? I would not mind looking up the professional that helped you. Do you have any?
My CFA Julianne Iwersen Niemann, a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
Thank you for sharing, I must say, Julianne appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive.
Best video I’ve seen on this topic! Thank you!
as someone with ZERO tax knowledge even back when i was under W2's this is explained so well, i understood everything! thank you so muchhhhh
Also... is GREAT to have a CPA making a video on the subject... Seemed like attorneys had taken over tax related videos... just to end up suggesting trusts, holding companies, series LLC's... and the "words" Wyoming, Delaware, Nevada, anonaminity.... for us regular folks with our hustles that just want to make some sort of reasonable living.
YOU will make more with your mind then u will ever make with your back!
Wow. I wish I could have had this clear of an explanation 20 years ago. Great job. Thank you.
The best explanation yet!
The only thing I didn’t see you explain was retained earnings and how they are taxed differently and how a different structure(c corp) can reduce tax on retained earnings.
No tax on retained earnings unless distributed (as dividends) from c-corp. All others, no tax on distributions as it has already been taxed and owner has simply decided to leave that cash in the entity.
Thank you for breaking this down in such an simple and easy way to understand. A+ video!
Great explaining these different business entities and how the tax implications can impact you. Best video I've seen so far. Definitely wanna check out your course.
Thank you. I can't believe I finally understand this nonsense created to confuse all of us.
The financial system has been artificially pumped for over a decade to ensure big pockets were lined; and now those same hands will make a fortune in the largest transfer of wealth in human history by shorting it on the way down. Inflation does have a roll, but that's to keep everyone panicked, and focused on their bills and expenses, rather than focus on the capital crimes of politicians and corporations,I'm still at a crossroads deciding if to liquidate my $338k stock portfolio, what’s the best way to take advantage of this bear market??
Find stocks with yields that exceed the market and stocks that, at the very least, follow the long-term market trend. However, you should get guidance from a financial advisor if you want to create a successful long-term plan
I agree, I've been in constant touch with an Investment advisor for approximately 17 months. These days, it's really easy to buy into trending stocks, but the task is determining when to sell or hold. That's where my advisor comes in, to help me with entry and exit points , I've accrued over $337k from an initially stagnant reserve of $148K all within 18 months...
I need a guide so i can salvage my port-folio due to the massive dips and come up with better strategies. How can one reach this advisor??
Mine's REBECCA NOBLETT ROBERTS. She turned out to be better and smarter than all the advisors I ever worked with till date, I’ve never met anyone with as much conviction.
I ran an online search on her name and came across her websiite; pretty well educated. thank you for sharing.
Tax laws can be so complex, and it’s super helpful to break them down like this. Understanding how different policies can impact our finances is crucial for making informed decisions.
Making profitable investments during this time of political change can be risky without that insight. For me, working with an adviser is the best first step to navigate these complexities and make informed choices.
I think having an investment advisor is the way to go. I've been with one because I lack the expertise for the market. I made over $490K during the recent dip, highlighting that there's more to the market than we average folks know.
Hmmm this is quite interesting, Please can you leave the info of your investment advisor here? I’m in dire need for one.
Nicole Anastasia Plumlee can't divulge much. Most likely, the internet should have her basic info, you can research if you like.
I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get.
Thanks!
You’re welcome! Appreciate you 🙏
Are we able to have a downloadable version of this Excel example?
YES!!! , Buy the course 🤣
This is great information. Thank you for your service!
@NaviMarajCPA you mentioned the associated taxes when taking a dividend from the C-Corp, but you did not mention how would the distribution from the S-Corp would be taxed, assuming John does not want to leave $60K in the company's account.
They would be taxed at his individual tax rate. He should have clarified that.
@@misterj3133 So if John took $40K salary and $60K dividend taxes would be the same as the LLC, right? This is the real "apples-to-apples' comparison. Of course taxes are lower if you get $0K vs $100k. I guess I'm not really sure what the true benefit of an Scorp is.
@@misterj3133 the tax is already paid, whether he distributes it or not. So, any distribution from an s-corp is "tax-free" at that time. The tax has already been paid.
@@SuspiciousAccountBeepBoop The true benefit of the s-corp is that payroll/self employment taxes are paid on the w2 earnings only...not anything retained. The retained earnings are taxed at individual rate. If in the LLC, the full 100k pays individual rate + self-employment (i.e. payroll taxes).
I liked the way you explained. Thank you so much!
This video is genuinely inspiring! -- "Embrace your aspirations with unwavering determination."
Well, thank you!
Good explanation! Some things that often get overlooked are the filing of the Schedule K1, bookkeeping costs, legal fees and filing fees.
It's honestly all water under the bridge.
All those fees just count as deductions anyways. If your business is making good money you will be looking for any and all ways to spend money on for the business to reduce your net profits.
Deductions are still expenses...
@@legacymoney Yes, the money leaves the checking account.
Great video! Currently have a S Corp will convert to a C Corp soon. Then open another C Corp for another industry. I was told that its less hassle to get a loan with a C Corp vs S Corp if need be.
Thank you so much for this video! so helpful!
Navi in order to be set up as a S Corp do you have to revenue a certain amount?
Thank you so much, the best video I have ever watched that answered all my questions regarding the taxation rules on different types of entities. It helped me convert my LLC to an S-Corp and save on taxes. God bless you!
Thank you for this video, helped cleared a lot of doubts. Do you have the spreadsheet where I can download it or use it?
Thank you this was really helpful
Great explanation
Thank you, really enjoyed
Very thorough! Thank you! Your side by side approach helps make it clear.
You’re welcome! Glad it was helpful for you.
@@NaviMarajCPA Are you taking on any new clients?
Unfortunately, not at this time but if you shoot me an email I will eventually respond with some referrals.
@@NaviMarajCPA Understood.
@NavimarajCPA For trading in Florida would it be wise to create an LLC that is then under an Scorp? Whats the best setup for trading in the market?
Fantastic presentation!!
Best one to save on Alimony and chlid support?
Question: Should you start at LLC is company makes less than 100K then covert to S Corp when profits increase?
Loved this!! Thank you🙏🏾
Great video!
Amazing explanation!! Thank you!
great video.. easy to understand..
Regarding the Sole Proprietor tax, if the business profit is $1,000,000, do we still use the same formula to calculate the social security and Medicare taxes?
For example:
$1,000,000 x 0.153 = $153,000.
SS is caped at around 150k. And there's extra Medicare after some amount, 250?. You can google the exact numbers for 2024.
Outstanding video. Thank you. FYI: NH also has no state income tax.
May I have a copy of that spreadsheet? or be sent the formulas to input?
Would be great if you can make a video on how these profits flow into your personal return and are taxed
They are taxed as ordinary income (same as a w2 wage) for LLCs, & S-corps, which is why they call them pass-thru. You don’t have to file a separate tax return for the entity. It’s just another line item of Income on your Fed 1040 (from your schedule C/business). But if your business expenses (including assets purchased and depreciation, etc) exceed your income, then you have a Net Loss and it is a Negative Number in your Income column, thereby reducing any other type of income (such as dividends, W2, pensions, etc).
My understanding of it. Not tax or financial advice.
@@AscDrew No. There are separate tax returns for a multi-member LLC, S Corp and C-Corp....which issue the K1 which flows to your personal tax return. Pass-thru entities file returns but do not pay taxes. C-corps file returns AND pay taxes. Not tax advice, but accurate.
In the S-corp example, what happens with the 60K? That would be left over for business profits, but would that not be taxed?
I also had the same question.
No one ever answers this question
What happens with that $60K?
You need to sign up for the class to get the answer 😎
you can keep it with no extra tax. if you use it for the business then the business "owes" you that money. sometime down the line you can just take it with no tax. i know from experience . your company is profitable but you need to leave the money in the business. it becomes a capital investment in the company. in the future if you take the money you write yourself a check from the business account and it is just a drawing against the capital investment . so you are just taking your money back.
great breakdown! Worth a comment for the algorithm.
Thank you!
Thank you for this explanation! 🌺
The S-Corp 60-40 split was not explained for the 60 side.
Can also add Trust into this equation . For property management business
Really appreciate your insights
Well done, finally understand this
Explained very well, thanks!
Please explain the FIT tax for S corps.
Thanks for such simple explanation!
Is capital gain applicable for all type of business formation if the sector is in real estate business?
Love the video. But what about the potential benefit for section 1202 $10 million capital gain exclusion when selling the company? Please create a follow up video to discuss this
When comparing total taxes between Sole Prop and S Corp in Tennessee, the disparity isn't significant. Although S Corporations can potentially save on Social Security and Medicare taxes, they are required to file and pay Franchise and Excise taxes. The Excise tax amounts to 6.5% of net income, and the Franchise tax is 0.25% of the greater net worth or tangible property in Tennessee. In this case, Sole Prop may pay roughly $8,000 more in Social Security and Medicare taxes, whereas S Corp pay a similar amount for Franchise and Excise taxes. However, it's important to note that while Social Security and Medicare taxes contribute to your SSA benefits, Franchise and Excise taxes are not recoverable.
I wonder what the math is though?. Later in life, the average American is only getting 42% to 28% of what you put into fica. I wonder if losing 6% while being aggressive in personal investing beats fica benefits? The people that start LLC, s Corp etc are middle and upper middle class mostly.
A C-Corp does not pay social security or medicare taxes UNLESS they have employees or unless the owners take draws (which looks like a salary payment). Also... a capital gain only happens when the business (or some of it's property) gets sold. Bottom line.... A C-Corp pays it's own taxes. S-Corps pass on their tax liability or losses to their owners and are therefore taxed at the owners' personal tax rate. Don't be a sole proprietor. Also be a sole C-Corporation OWNER if the company is profitable. If the company is not profitable, then it pays no taxes but the owners don't get credit for the company losses. Do S-Corp if the company is NOT profitable (yet). Choose WHO gets taxed (you or the company) depending on which results in a lower overall tax burden. If you have multiple owners, the same things apply, but are more complicated. Owning a business is MOSTLY better. (I'm not a CPA, but I've run businesses my whole adult life).
But if the LLC is not profitable then there is no SS or Medicare taxes to ne paid; and you still write off the losses. Right?
@@AscDrew Better to discuss that with an accountant for your situation.... but all expenses are deductible from revenue (the result is a profit or loss) which determines taxable income. SS and Medicare (if paid) are business expenses. So one can only consider an actual paid expense as actual expense. You can't deduct an expense you didn't incur. (If I'm wrong, I want to know!) Also I don't like the term "write-off" as it presumes something that is not true. So called "write-offs" are simply business-related expenses that reduce taxable income. Basically all business expenses, including payroll and related expenditures. But remember that business expenses for one business are revenue to another. That's why the system works. Somebody eventually earns an income and pays tax on it. Meanwhile, the whole chain of cash flow has employed people, etc.
Well. You can also do equity repayments instead of salary or dividends. 20% in fed taxes is still a lot.
How would it be for an incorporation
This is great but will have to rewatch this video at least 2 more times. Omg my head hurts after listening to all those numbers lol. Great information nevertheless. Got yourself a follow
Súper useful, thank you !
You're welcome!
A MMLLC can elect to be taxed as an S-Corp. Would be nice to see a column with those numbers although I image it would be the same as the S-Corp column. Just so its understood that there are other options for MMLLCs.
if taxed as an s-corp, the single member or multi member LLC would be taxed the same as the column shown
my man. so helpful.
Good basic info. As a lawyer, it leave out disadvantages/ advantages of each entity
Pros and cons are specific to each individual. Hard to generalize these in a video.
I have a question. Considering personal cash flow the sole prop and general part, the individual gets taxed at a personal level and they get those funds. And a C-corp the owner takes a salary and the C-corp gets taxed on the $60m and if the owner wants those funds the need to take a distribution, they can't just pulled money from the register like a sole prop and gen part can do. But what you don't show is, how does the S-corp treat the $60m that was taxed on the corp level? Don't they have to take a distribution also? And they don't get taxed then, correct? And if so, can't they skip the salary and take a distribution instead? I work at a bank and I see a lot of S-corps and this seems to be the norm.
I would like to get more information a a distribution
The s-corp does not pay tax on the 60k. It flows to the personal 1040 via Form K-1. Any s-corp distributions would be "tax free" because the taxes were already paid when filing the 1040. They do not have to take a distribution...it can stay in the business for any reason. Can't skip the salary...you must have a "reasonable" salary.
The big problem with the Corp S is that on a personal level it affects you a lot, since it distributes dividends or not, you must pay for them in your personal taxes and your health insurance skyrockets among other things
My questions is
a c corp has a profit of 50k the owners do not want to drawn that money from c corp still he has to pay I his tax return if 1099 div was issued ? Because he said if you want to delay the dividend tax for later , means u can leave alone the 50k and do not issue 1099div and they don’t need to be report it u til he takes that 50k im future year?
Thanks for the video. Helped a lot. Regarding your course, are those tax strategies still valid?
This video is well done and easy to follow. Is there a way that I can get a copy of the spreadsheet?
Appreciated your channel so many helping tax information
I have a SMLLC right now. As a reak estate professional, what would you recommend as my tax status be? Leave it as a Sole Proprietor, or S-corp or find another person and form a MMLLC/Partnership?
great video. Question: So if the S-Corp was to pay John the remainder of the $60k, the same math in column L would apply? Wouldn't that be apples to apples comparing to Sole Prop? Keeping the $ in S-corp isn't apples to apples vs. Sole Prop.? Am I missing something? What I am getting at is - who controls the funds in those scenarios. thank you!
you own the profits in an S corp. you can just take the 60k out of the bank or whatever with no extra tax. you have already paid the personal tax as an S corp. only trouble you can get into is the IRS can say you paid yourself too low a salary so you owe more fica taxes . social security max;'s out but the others don't. but you have to pay them as a S corp anyway.
@@ronblack7870 thank you
Since sole corporation is a flow-through entity, do owners pay income taxes on distributions in addition to the federal income tax and how does it reflect on the balance sheet in the equity section?
No. Yes.
Great video. Could you explain how and why some CEO’s give themself a $1 salary and how’s that’s beneficial. Thanks!
They only pay payroll taxes on the $1. Their compensation package is likely tied to stock performance, etc. They might get stock optons, etc. Way to big a topic for this forum. Or, they dont need it and are keeping the money in the business to grow the business.
How do business write offs come into play? Is that part of the 25K expenses?
do you also provide income tax service for someone who want and are on LLC?
great explanation, I have a question, I am Canadian and I own a C-corp as I have a business in the USA, what happens to social security and Medicaid as I don't have status in the US
Can you revisit the benefits of having a C-Corp owned by your self-directed ROTH IRA or Solo 401K Single member LLC?
C-Corp pays tax on EBIT and you can elect to have all of the after tax profit paid to your SD IRA’s (or Solo 401K) LLC. Qualified DIVIDENDS are passive income and therefore not taxable inside you Roth IRA
Hi great video how does payroll deduction fit into all of that?
Very great explainer video. Easy to follow and understand. I would just suggest that you don’t keep the mouse on the cell’s figure while explaining. It prevents a continuous visual focus during the video.
If the LLC elects to be taxed as an S corp, do those S corp numbers apply to each member of the LLC?
Can a partnership be created between an individual and an llc?
Great explanation.
So as an s corp what is done with the $60,000 since there is no taxes being taken from it?
That 60k stays in the business account and will not be subject to SE taxes since you aren’t claiming that as income. You still pay income tax on the 40k and 60k, only difference is not paying social security and Medicare on the 60k.
@@NobleSpeedmotoworks OMG this is the answer I've been looking for. Thank you!
I'm curious about your s-corp numbers, specifically, the numbers related to the $60,000. I can't figure out how $60,000 results in the same numbers as the $40,000 in the s-corp column. I'm getting $3,720 for Social Security and $870 for medicare. Does the s-corp ONLY pay the same amount as what the employee has to pay without regard to the fact that it's $20,000 higher? In other words, does the s-corp only have to match the employee's social security and medicare contributions instead of paying the same percentages as the employee?
Payroll taxes are only paid on the wage amount...both for the employee and the employer (S-Corp)
Need you to show example based on highest tax bracket like 500k or greater.
What if you reinvest the profits of the C-Corp?
I saw your other video that shows s-corp can be charged capital gains tax, how come you excluded it here? Or, did the rules change?
If you use a payroll company to deduct taxes what happens to the money they deduct does it get sent to the government right away or do you still have access to it ?
they take it from your bank account and it gets sent pretty much right away electronically .
Would it be possible to do one for $1M profits? And with only the bare minimum amount of "Reasonable Compensation". Doesn't SS/Medicare have a cap of $200K? I am very curious to see if the lower 21% C-Corp tax would work better at much higher income levels.
ss caps out but medicare does not . medicare used to only be on salary then they changed it so medicare is on all the profit in S corp. ss does cap out currently but politicians are always yacking about making it on all income.
Very helpful thanks
Excellent vid 🔥🔥🔥
love it. Thank you!
@NaviMaraj- when (gross income wise) would an S Corp still make sense in a state like TN? Single member LLC here (newly formed from S Corp)
Curious about the ??? and $9247 ?! is that another entity or just a thumbnail? Thank you. It is a great video.
I have uploaded the free “help” and it doesn’t respond to any entry. What do I do wrong.
can u upload a link of excel spread
what is the difference between solo and llc since they pay the same tax
LLC is it's own legal entity, sole props arent.
Hello how can I get the spreadsheet?
Shouldn’t the dividend on the C Corp be taxed as ordinary income instead of capital gains?
It’s a possibility depending on the facts and circumstances. Even more of a reason to not use the C Corp for small businesses.
@@NaviMarajCPA Shouldnt it be taxed as a dividend?
Awesome job
Navi, I'll be moving to Nevada and changing career to stock/crypto trader. Is S-corp the best option for me?
What do you charge to set up a CRNA LLC (S-Corp)?
Converting a C-corp to an S-corp is a tax issue, or a State Department Issue first?
Any way we could get our hands on that excel file? :D
My wife and I are nurses. We work as self employed 1099. I could open a single member LLC and do S election. And they both work in the same LLC as an S corp. And that the 1099s are reported from both of them through the S Corp. Then the S corp generates w2 for each one and the dividends pass through K1 to the owner. Or each would have to open their own LLC and make S election. thanks
Don’t quote me but u believe you can file a partnership (mmllc) as a s corp, please let me know if I’m wrong
Don't C-Corps offer more tax deductions? If a C-Corp has more expenses strategically, cant they pay significantly less in taxes? Why would anyone elect to have any significant profit in a C-Corp or most business structures? Nonetheless, great video. Very informative!!! Ty.
max fed rate in a C corp is 21% max S corp fed rate is 37% . so it depends how profitable you are and what you want to do. to grow the business a C corp lets you reinvest more profits instead of paying them in taxes. also depends on the state and what you do. in ny if you manufacture then no state income tax which is a huge break if you are profitable.
Hi Navi, I rehab real estate multifamily properties for rental investments and just starting to develop apartment for-sale condos. I have come across CPAs and tax attorneys online that stated that I should form a C-Corp to avoid flagged as a dealer on my 1040 schedule, and get hit with up to 37% in federal taxes. They noted that rehab and development are active businesses. Is there any merit to their thesis to form an LLC taxes as c-Corp over an S Corp?
(With my rehab rentals, I have been capitalizing most renovation / project costs and taking a salary albeit paying self-employment taxes.)
Many thanks