Hello, I've been running my business as an LLC the past couple years. When filing 2015 taxes, my accountant mentioned that there may be some benefits to converting to an S Corp.
I've been doing some research and have put together an overview of the questions that come to mind. I have an appointment coming up with my accountant soon, but figured I would take a stab at getting some informal information to be as prepared as possible.
Here is an outline of things to date:
I've been doing some research and have put together an overview of the questions that come to mind. I have an appointment coming up with my accountant soon, but figured I would take a stab at getting some informal information to be as prepared as possible.
Here is an outline of things to date:
1)
I currently have an LLC.
It seems there is an advantage of setting it up as an S-Corp.
In general, what are the factors to distinguish whether this makes sense or not?
2)
What is the process to make that conversation?
What specific steps would need to be done to convert it?
Will any of my federal information change, such as my Tax ID number?
3)
Ongoing, what are the requirements for having a company of this status?
With an LLC, I pretty much only need to submit my annual filing, pay my quarterly estimated taxes and then my yearly tax filing.
What additional, if any, steps would I need to do if I convert to an S-Corp?
4)
As I understand it, part of the difference between LLC and S-Corp is that I need to draw a salary.
Are there any rules with regards to how much, as a percentage of total company revenue, I need to draw? As well as frequency of paying myself?
Any issues with drawing a $1/year salary and pulling the rest out as bonuses, dividend, etc as I see fit?
How do my earnings get taxed at a personal and company level if I pretty much take out all revenue earned?
What is the difference between taking it out as salary vs dividend/bonus? Any frequencies in either payment type that must be adhered to?
Does my "salary" need to be consistent? Or can it fluctuate to coincide with the amount of revenue my company earns?
What is the most effective way to pull the money out of the company with the least amount of tax exposure?
5)
Aside from drawing the salary, what other consideration points do I need to be mindful of when pulling money out of the company?
6)
I currently have a 401K plan that I set up through my LLC.
To date, I have not made any contributions to it from either my LLC nor my personal account.
Moving forward, I would like to start contributing to it from my company (putting as much as possible into it) as well as from my personal account (again, putting as much as I can into it).
What are the consideration points I should be mindful of?
7)
From a tax preparation perspective, how do things change from having an LLC to S Corp?
How does the process to file taxes change from the business perspective, as well as from my personal filing?
Right now, they are done as a single unit. Is that the same with an S Corp?
8)
Is it possible to maintain my company as an LLC but to have the IRS tax it as an S Corp?
How is this different than doing a full conversion?
What are the pros and cons?
From some initial research, it seems like there may be a way to simply have the IRS view the company as an S Corp but maintain LLC status at the entity level and continue doing business as I have done to date.
9)
Thus far in 2016, I have earned and taken out $42,000 from my LLC.
I have another $40,000 that I am about to collect and pull out in April.
Then, in May, I have about $100,000 that I am scheduled to receive and pull out.
For the rest of 2016, I estimate to collect another $250,000, more or less.
10)
With those numbers in mind, what are the implications to making this conversion?
Does the fact I have already pulled out money impact anything?
Would it be wiser to wait to take out any more money until the conversion is done?
Or can I continue to process and take out money while the conversion is taking place without any impact?
In other words, can I continue as I have been and then retroactively structure the company and tax filings in the manner that best suits me?
11)
What other consideration points have I left out that I should be considering?
Thanks in advance for any insight!I currently have an LLC.
It seems there is an advantage of setting it up as an S-Corp.
In general, what are the factors to distinguish whether this makes sense or not?
2)
What is the process to make that conversation?
What specific steps would need to be done to convert it?
Will any of my federal information change, such as my Tax ID number?
3)
Ongoing, what are the requirements for having a company of this status?
With an LLC, I pretty much only need to submit my annual filing, pay my quarterly estimated taxes and then my yearly tax filing.
What additional, if any, steps would I need to do if I convert to an S-Corp?
4)
As I understand it, part of the difference between LLC and S-Corp is that I need to draw a salary.
Are there any rules with regards to how much, as a percentage of total company revenue, I need to draw? As well as frequency of paying myself?
Any issues with drawing a $1/year salary and pulling the rest out as bonuses, dividend, etc as I see fit?
How do my earnings get taxed at a personal and company level if I pretty much take out all revenue earned?
What is the difference between taking it out as salary vs dividend/bonus? Any frequencies in either payment type that must be adhered to?
Does my "salary" need to be consistent? Or can it fluctuate to coincide with the amount of revenue my company earns?
What is the most effective way to pull the money out of the company with the least amount of tax exposure?
5)
Aside from drawing the salary, what other consideration points do I need to be mindful of when pulling money out of the company?
6)
I currently have a 401K plan that I set up through my LLC.
To date, I have not made any contributions to it from either my LLC nor my personal account.
Moving forward, I would like to start contributing to it from my company (putting as much as possible into it) as well as from my personal account (again, putting as much as I can into it).
What are the consideration points I should be mindful of?
7)
From a tax preparation perspective, how do things change from having an LLC to S Corp?
How does the process to file taxes change from the business perspective, as well as from my personal filing?
Right now, they are done as a single unit. Is that the same with an S Corp?
8)
Is it possible to maintain my company as an LLC but to have the IRS tax it as an S Corp?
How is this different than doing a full conversion?
What are the pros and cons?
From some initial research, it seems like there may be a way to simply have the IRS view the company as an S Corp but maintain LLC status at the entity level and continue doing business as I have done to date.
9)
Thus far in 2016, I have earned and taken out $42,000 from my LLC.
I have another $40,000 that I am about to collect and pull out in April.
Then, in May, I have about $100,000 that I am scheduled to receive and pull out.
For the rest of 2016, I estimate to collect another $250,000, more or less.
10)
With those numbers in mind, what are the implications to making this conversion?
Does the fact I have already pulled out money impact anything?
Would it be wiser to wait to take out any more money until the conversion is done?
Or can I continue to process and take out money while the conversion is taking place without any impact?
In other words, can I continue as I have been and then retroactively structure the company and tax filings in the manner that best suits me?
11)
What other consideration points have I left out that I should be considering?