[Anonymous]

In the chart below, it seems that an LLC is better than a S-Corp in every way. Is there any advantages a S-Corp have over a LLC that I missed?

https://www.diffen.com/difference/LLC_vs_S_Corporation

[jyoung117]

Hm, I dunno if this is considered a pro for an s-corp, but if you start a business with a partner, both own 50%, but one person is doing 75% of the work they can't decide to split the profits/losses. So pro if you don't do the work, con if you do 75% lol.

S-corp will force you to have a payroll so you can take withholding instead of paying estimated tax payments.

If you are a startup and looking for a VC, you will need to convert to a c-corp. It's easier to do that with an S-Corp.

I took my first exam in AUG 2013, so glad they have access until you pass material updates

AUD - 56, 59, 65, 74, 62, 69, 70, 74, 70, 74, 81
BEC - 74, 73, 75
REG - 74, 74
FAR - TBD

[jyoung117]

Hm, I dunno if this is considered a pro for an s-corp, but if you start a business with a partner, both own 50%, but one person is doing 75% of the work they can't decide to split the profits/losses. So pro if you don't do the work, con if you do 75% lol.

S-corp will force you to have a payroll so you can take withholding instead of paying estimated tax payments.

If you are a startup and looking for a VC, you will need to convert to a c-corp. It's easier to do that with an S-Corp.

I took my first exam in AUG 2013, so glad they have access until you pass material updates

AUD - 56, 59, 65, 74, 62, 69, 70, 74, 70, 74, 81
BEC - 74, 73, 75
REG - 74, 74
FAR - TBD

[Givemesleep]

If you are active member in an LLC all the profits allocated to you are subject to SE tax. In an S corp you are only required to take a reasonable salary and the rest can be distributions (pro rata). In reality once you reach the fica limit its just a medicare tax issue. So for an entity with huge profits an S may be the way to go and save the 2.9% medicare tax.

Reg 11/15/2011 - 80
Aud 02/28/2012 - 81
Bec 05/31/2012 - 78
Far 08/31/2012 - 83 Do you believe in Miracles, YES !!!

CPA License received 10/2012 !!
CFE License received 04/2013 !!
EA License received

Givemesleep

[Givemesleep]

If you are active member in an LLC all the profits allocated to you are subject to SE tax. In an S corp you are only required to take a reasonable salary and the rest can be distributions (pro rata). In reality once you reach the fica limit its just a medicare tax issue. So for an entity with huge profits an S may be the way to go and save the 2.9% medicare tax.

Reg 11/15/2011 - 80
Aud 02/28/2012 - 81
Bec 05/31/2012 - 78
Far 08/31/2012 - 83 Do you believe in Miracles, YES !!!

CPA License received 10/2012 !!
CFE License received 04/2013 !!
EA License received

Givemesleep

[sonygal57]

Just want to point out the point of incorporating tends to be to limit liability…Becoming an LLC will do the same thing. The next thing to consider is profit/losses. If you expect losses they will more limited under an S corp. than an LLC so generally the first few years as a business an LLC will be more desirable unless or until you plan on making a profit of more than say approx. 110k (where ss taxes are phased out). Prior to these profits an LLC or LLP may be more beneficial.

Good old Gandalf, "All we have to do is decide what to do with the time that is give to us."
"Not all those who wander are lost."

FAR: I slayed the Dragon!
BEC: I defeated the Siren!
AUD: I eliminated Medusa!
REG: ?????

[sonygal57]

Just want to point out the point of incorporating tends to be to limit liability…Becoming an LLC will do the same thing. The next thing to consider is profit/losses. If you expect losses they will more limited under an S corp. than an LLC so generally the first few years as a business an LLC will be more desirable unless or until you plan on making a profit of more than say approx. 110k (where ss taxes are phased out). Prior to these profits an LLC or LLP may be more beneficial.

Good old Gandalf, "All we have to do is decide what to do with the time that is give to us."
"Not all those who wander are lost."

FAR: I slayed the Dragon!
BEC: I defeated the Siren!
AUD: I eliminated Medusa!
REG: ?????

[sonygal57]

What I think Jyoung should be pointing out is that Partnerships provide greater flexibility to allocate profit and losses accordingly.

As for give me Sleep…I think he/she needs sleep! Particularly with the comment “So for an entity with huge profits an S may be the way to go and save the 2.9% medicare tax.” More like 12.4% SS taxes…Not medicare taxes…I am confident he/she would read this and agree! Unless he/she is suggesting you can avoid medicare tax through dividends which would then mean a savings of 15.3% on dividend income….but of course IRS is going to be watching to make sure dividends are dividends and not self-employment income!

Oh and look at the Affordable care act because depending on the person's income the medicare tax is set to increase!

Point being is that a lot of start up businesses incur losses not profits and in that case forming an S Corp would be…uhhhh stupid compared to an LLC or an LLP because losses will be less limited under an LLC or an LLP….

That being said, in agreement with givemesleep, large profits are what encourage S corp's.

Good old Gandalf, "All we have to do is decide what to do with the time that is give to us."
"Not all those who wander are lost."

FAR: I slayed the Dragon!
BEC: I defeated the Siren!
AUD: I eliminated Medusa!
REG: ?????

[sonygal57]

What I think Jyoung should be pointing out is that Partnerships provide greater flexibility to allocate profit and losses accordingly.

As for give me Sleep…I think he/she needs sleep! Particularly with the comment “So for an entity with huge profits an S may be the way to go and save the 2.9% medicare tax.” More like 12.4% SS taxes…Not medicare taxes…I am confident he/she would read this and agree! Unless he/she is suggesting you can avoid medicare tax through dividends which would then mean a savings of 15.3% on dividend income….but of course IRS is going to be watching to make sure dividends are dividends and not self-employment income!

Oh and look at the Affordable care act because depending on the person's income the medicare tax is set to increase!

Point being is that a lot of start up businesses incur losses not profits and in that case forming an S Corp would be…uhhhh stupid compared to an LLC or an LLP because losses will be less limited under an LLC or an LLP….

That being said, in agreement with givemesleep, large profits are what encourage S corp's.

Good old Gandalf, "All we have to do is decide what to do with the time that is give to us."
"Not all those who wander are lost."

FAR: I slayed the Dragon!
BEC: I defeated the Siren!
AUD: I eliminated Medusa!
REG: ?????

[impska]

S-Corp stock is easily transferable, LLC membership is not.

The ability to freely sell/trade/gift part or all of your ownership interest is the primary benefit of an S-Corp over an LLC.

REG - 94
BEC - 92
FAR - 92
AUD - 99

[impska]

S-Corp stock is easily transferable, LLC membership is not.

The ability to freely sell/trade/gift part or all of your ownership interest is the primary benefit of an S-Corp over an LLC.

REG - 94
BEC - 92
FAR - 92
AUD - 99

[sonygal57]

I think one of the key things to consider prior to setting up an Scorp is do you expect profit? If you do not think you will be profitable in the current year then you are a dumb for considering an Scorp!!!

Good old Gandalf, "All we have to do is decide what to do with the time that is give to us."
"Not all those who wander are lost."

FAR: I slayed the Dragon!
BEC: I defeated the Siren!
AUD: I eliminated Medusa!
REG: ?????

[sonygal57]

I think one of the key things to consider prior to setting up an Scorp is do you expect profit? If you do not think you will be profitable in the current year then you are a dumb for considering an Scorp!!!

Good old Gandalf, "All we have to do is decide what to do with the time that is give to us."
"Not all those who wander are lost."

FAR: I slayed the Dragon!
BEC: I defeated the Siren!
AUD: I eliminated Medusa!
REG: ?????

[rupert]

@sonygal57 – I think you need sleep 🙂 Givemesleep said “So for an entity with huge profits an S may be the way to go and save the 2.9% medicare tax.”

I believe Givemesleep was referring to the scenario in which the FICA limit has already been reached with a “reasonable salary.” In this case, the S Corp will save the 2.9% medicare tax.

“If you do not think you will be profitable in the current year then you are a dumb for considering an Scorp!!! “

This might be a little bold. There are many more things to consider.

FAR 90 Oct. 6, 2012
AUD 96 Dec. 8, 2012
REG 93 May 30, 2013
BEC 84 Aug. 31, 2013

NIU CPA Review Correspondence and Wiley Test Bank

[rupert]

@sonygal57 – I think you need sleep 🙂 Givemesleep said “So for an entity with huge profits an S may be the way to go and save the 2.9% medicare tax.”

I believe Givemesleep was referring to the scenario in which the FICA limit has already been reached with a “reasonable salary.” In this case, the S Corp will save the 2.9% medicare tax.

“If you do not think you will be profitable in the current year then you are a dumb for considering an Scorp!!! “

This might be a little bold. There are many more things to consider.

FAR 90 Oct. 6, 2012
AUD 96 Dec. 8, 2012
REG 93 May 30, 2013
BEC 84 Aug. 31, 2013

NIU CPA Review Correspondence and Wiley Test Bank

[Author]

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