Being taxed as a corporation (either a type C or a Sub S) allows the entity to issue payroll to the members so that taxes are regularly withheld. The drawback to a C Corp is that any net profit at the end of the year is taxed to the corporation, Ziegler says, often at a higher rate than that of the taxpayer, and is taxed again to the taxpayer upon distribution.
Best Tax Moves For Advisory Businesses
August 21, 2017
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"Separate business entities -- a subchapter S corporation, C Corp, partnership or an LLC -- can offer advantages such as allowing you to pay yourself out of their businesses and leaving remaining income from the practice taxable to the business itself. This means you’re not personally liable for all of the tax on the business and means that you don’t have to pay self-employment tax." S Corporations and LLCs are flow-through entities, meaning all income and expenses flow-through to the individual owner(s) for tax purposes. To the best of my knowledge, "salaries" cannot be paid to the owners to avoid self-employment tax. This can, however, be done under a C-Corp structure.