PA: Corp-to-Corp and name needed for contracts

[PayrollHRGuy]

Thought process:

So...you have a dedicated business checking account. Invoices get deposited into the accout. Expenses get paid from the account.

When it comes time to get paid, you must pay youself the same salary as other would get paid. Of that salary, you can either a) submit tax payments to their respective agency (ie state income tax) (via quicken payroll), or the b) set aside the amount you need to pay and submit with tax return in April.

Sound right?

No No No No.

If you are an employee the employer taxes along with any withholding must be paid at the time the law requires they be paid.

I retract what I've previously written to you in this thread. You do need to you a payroll service of some flavor. You also need a good CPA (many of whom would also handle payroll and associated taxes for you). I would also consider getting some help from a business consultant.

 

[LdiJ]

Thought process:

So...you have a dedicated business checking account. Invoices get deposited into the accout. Expenses get paid from the account.

When it comes time to get paid, you must pay youself the same salary as other would get paid. Of that salary, you can either a) submit tax payments to their respective agency (ie state income tax) (via quicken payroll), or the b) set aside the amount you need to pay and submit with tax return in April.

Sound right?

----

Debating the value of the s-corp contribution to retirement against the con extras of an s-corp (taxes, registration fees, s-corps get more scrutiny, payroll related efforts etc.)
Would an s-corp be overkill?

I missed the bolded when I responded to this post previous. I have already told you that federal payroll tax deposits MUST be made monthly, and state deposits will depend on your individual state's laws.

However, it does appear that you do not listen well, therefore you probably should use a payroll service.

 

[pixelrogue1]

If you are talking about your S corp (corporation or LLC), you YOU can not do this. Your corporation/LLC must act like a normal employer.

If you decide to leave the LLC as a disregarded entity for your sole proprietorship, then yes you just file quarterly estimated tax payments and settle it up on the 1040 at the end of the year.

If I create another LLC just for consulting, treat it as a second disregarded entity then file quarterly estimated payents, this seems much easier. This would allow me to contribute to retirement in a self directed 401k, but I would miss the opportunity of the company contributing to the 401k.

Are there others reading this thread with insight on the pros/cons and direction to take?

 

[pixelrogue1]

Quarterly.

 

[pixelrogue1]

Yes, got it. These responses are not necessarily in order. I am listening, appreciate the feedback immensely, and hope we can keep from passing personal comments.

 

[FlyingRon]

Yes, that would be fine. Both LLCs would be disregarded entities. Take your gross proceeds and compute what your income would be an pay the estimated tax quarterly. At tax filing time reconcile the revenues with expenses and then pay your taxes on that.

 

[pixelrogue1]

Yes, that would be fine. Both LLCs would be disregarded entities. Take your gross proceeds and compute what your income would be an pay the estimated tax quarterly. At tax filing time reconcile the revenues with expenses and then pay your taxes on that.

Would you have a point of view on the deciding between the easier route of a disregarded LLC, to that of the s-corp (with the primary motivator of an s-corp would be to maximize retirement contribution opportunity?

 

[pixelrogue1]

If the decision moved to disregarded LLC, then I expect I could then every back to the starting point of maintaining the established DBA, keeping everything as is (foregoing the company contribution to retirement opportunity.)

 

[FlyingRon]

Really, you can have the DBA for the disregarded LLC#1 or you can have the DBA for your own name (this is quite common for people running businesses without an LLC or corporation in the mix). As far as tax purposes goes, again the DBA means nothing. IT DOES NOT EXIST AS AN ENTITY. It's purely notice to the state that you are not operating under the real entity name. As far as TAX issues go, it makes no difference if the income comes from disregarded LLC #1, LLC#2 (if you make it), or under your personal name. The IRS views them all the same.

 

[pixelrogue1]

Really, you can have the DBA for the disregarded LLC#1 or you can have the DBA for your own name (this is quite common for people running businesses without an LLC or corporation in the mix). As far as tax purposes goes, again the DBA means nothing. IT DOES NOT EXIST AS AN ENTITY. It's purely notice to the state that you are not operating under the real entity name. As far as TAX issues go, it makes no difference if the income comes from disregarded LLC #1, LLC#2 (if you make it), or under your personal name. The IRS views them all the same.

Yes, I understand the taxes via DBA, LLC and personal taxes would've the same.

The main question comes down to either setting up the s-corp (maximizing retirement contribution options at the expense of extra taxes, time, expense, and navigating the employee & W2 topics,) or or sticking with basic LLC (foregoing the extra bit of retirement contribution from the s-corp.) It is hard to say this early in change what the extra retirement contribution opportunity will even be at 25% of gross.

 

[FlyingRon]

Frankly, I'm failing to see how an S corp helps you. Unless you have corporate revenue that exceed the salary that you would be due, you'd do better just maxing out what you can do on your own. A SEP allows you to put up to 25% of your income into the pension. What do you envision you're going to be able to do better with the S corp?

 

[Taxing Matters]

Where the income is almost entirely from personal services (like consulting) provided by the single owner the business a S-corporation is not typically very useful for saving tax over simply operating as a sole proprietor (which includes single member LLCs, since they are treated for federal tax purposes like a sole proprietorship). That’s because all the income will be seen by the IRS as allocated to your salary for the work done for the corporation and, as FlyingRon correctly notes, when the corporate income is essentially the same as the salary the corporation pays you there is no real tax benefit in having the S-corporation. It is where the business has significant income from something other than your own personal services (like, say, a manufacturing operation) or even a consulting company in which you employ other people that a S-corporation can be valuable in at least cutting down on the FICA tax you pay.

You should be able to use one or more of the various retirement plans available to self-employed persons to save as much for retirement as you could do with a S-corporation.

 

[pixelrogue1]

Frankly, I'm failing to see how an S corp helps you. Unless you have corporate revenue that exceed the salary that you would be due, you'd do better just maxing out what you can do on your own. A SEP allows you to put up to 25% of your income into the pension. What do you envision you're going to be able to do better with the S corp?

S-Corp intention was (would be) to maximize retirement contributions....the standard allowance for an employee (18.5) and then 25% of gross as company contribution. That would be the primary motivator, followed by partial smaller distributions (if any) for any funds available after expenses, salary etc.

Thought SEP would also be capped at 18.5 (and at only 25% of income, well, that might be a deterrent.)

 

[pixelrogue1]

You should be able to use one or more of the various retirement plans available to self-employed persons to save as much for retirement as you could do with a S-corporation.

My understanding is that all retirement options are similar (~ 5.5 IRA & 18.5 401K,) and the only way to move beyond that amount (for those under 55) is through an s-corp.

Which plans were you thinking of that would mirror s-corp options?

 

[pixelrogue1]

UPDATE:

Not sure why this hadn't surfaced until now?

According to Vanguard, anyone who is self-employed can set up an employ'er' account - traditional 401k - and contribute up to 25% of gross (up to I think he said 55k.) So the incorporation 'type' (LLC/s-Corp etc.) does not matter so long as you are self employed.

If this is true, then there would be little benefit proceeding with the s-corp, and stick with the basic LLC.