What Entity do You Use for your Business

[equinecpa]

I"m a sole proprietor with one part-time employee and one contract bookkeeper. I have always simply practiced as a sole proprietor.

I'm often recommending my clients organize an LLC and then elect to be an S corporation. I'm wondering why I haven't done that myself? I can organize as a PLLC as I'm a CPA. It even sounds official doesn't it?

So are there any drawbacks to a professional going the LLC/S corp route? I'm thinking it's time I started saving on self-employment taxes.....

Carolyn

[ChEAr$]

with your reasoning. I incorporated way back in 1993 for the principal reason of protecting the name "Accutax" which I had been using since 1974. And yes, of course there have been SE tax savings as a benefit as an S corp. (grin)

Today, though I would take the LLC route and elect S corp status. The corporate state franchise tax is a flat $100, plus $10 to secretary of state, but an LLC doesn't pay that $10.

The only scare I ever got was maybe five years ago when IRS in it's finite wisdom sent out letters, to me included, trying to assess that PSC tax. About a week later when all of us all over the country complained about it, quoting the law of course, they saw the error of their ways. You would have thought that simply by having filed the 1120S would have precluded such a blunder. But... you know the bureaucracy.

[Lion]

Right now, I'm an LLC for some legal protection. Went from sole proprietor to LLC back some years ago for the protection. Then CT added a minimum $250 business entity tax for LLCs to match the minimum corporate tax. Might not have moved to an LLC if the fee was in existence when I made the change. So far, my profits are not so high nor from anything other than my own service as a tax preparer and bookkeeper that I could legitimately take distributions from an S-corp with no SE tax. If I start adding employees or otherwise generating profits from my capital contributions and not just my own services, I would consider an S-corporation. Am considering adding my husband as a member when he retires in another year and being taxed as a partnership to get my business off our Form 1040 (Schedule C). Even thinking about a C-corp to be able to pay benefits such as health insurance when we will no longer have my husband's through his current job, and not have to add to W-2.