Correct, compared to C-Corps. Is there and advantage of LLC versus S-Corp? -RickG
On Wed, Jun 3, 2009 at 5:36 PM, Scottie Arnett <[email protected]> wrote: > S-Corps get rid of the double taxation...but you are limited to how many > shareholders you can have and some other limited things. > > Scottie > > ---------- Original Message ---------------------------------- > From: "Marlon K. Schafer" <[email protected]> > Reply-To: WISPA General List <[email protected]> > Date: Wed, 3 Jun 2009 08:23:37 -0700 > >>Melissa does work at an accounting firm..... She's not the CPA but she does >>most of the paperwork etc. And, naturally we work very closely with the >>CPAs at the firm. >> >>We've looked at the money differences between sole proprietor and corp. >>There really isn't much difference if you stay honest with things. At least >>not at the low levels we're at. >> >>When we start making more money (in the next couple of years as things are >>sitting now) we'll likely be better off as a corp. Because the current >>business doesn't actually own anything we'll be able to easily set things up >>so that the corp rents things from us. The office, vehicles etc. In that >>way we can personally take some of the income while the corp writes it off. >> >>The way you juggle things to keep taxes down is to work the tax brackets. >>Right now we're able to stay in a pretty low one. But I'm running out of >>places and ways to expand so that's going to change. We'll pay less taxes >>when we have two smaller entities in smaller brackets. At least that's the >>way I understand it now.... >> >>One of the really great things about a sole proprietorship is asset >>management. We can take old computers home all day and it's no big deal. >>Just move it. If it's something owned by the corp we have to somehow >>transfer that product. More paperwork etc. >> >>Another thing a person has to be very careful with is who owns what. Mom >>and Dad own a large farm. Thousands and thousands of acres, mostly >>irrigated. Back when their corp got formed all of the assets were put into >>the corp. Now that they want to sell the farm they have to somehow make >>nearly twice as much because they'll be double taxed at the time of the >>sale. There will be income tax at the corp level AND capital gains at the >>personal level. Or some such similar mess. Basically when they sell 50% or >>so will to go taxes. Unless they can sell the corp it's self which is >>something no one wants to buy. People only want the assets, otherwise they >>end up with the same long term tax mess. It's also nearly impossible to >>gift enough assets back to themselves or their kids to make a difference. >> >>Both sole owner and corp have their places. The choices are not REALLY as >>simple as some people try to make them out. And how they get structured >>over the long run is very important yet almost no one ever goes to a lawyer >>that specializes in such things for advice on the best type of corp to form >>and how to run it from day one. Many things get done just because that's >>they way it is, even if there is a better way...... I still look at my >>avoidance of routing cpe. The reasons I liked bridging cpe have proven to >>be very true (radios are inflexible crappy routers) but the benefits have >>been wonderful anyway. It's something I wish I'd have listened to others on >>years and years ago. Human nature I guess. I am listening to the experts >>on tax matters though. grin >> >>marlon >> >>----- Original Message ----- >>From: "George Rogato" <[email protected]> >>To: "WISPA General List" <[email protected]> >>Sent: Wednesday, June 03, 2009 2:38 AM >>Subject: Re: [WISPA] Legal Entity - which type? Was: Quesiton on Funding >>/Financing / Capital Availability >> >> >>> Unless you actually make a decent salary. >>> When your a sole proprietor you have to pay the self employment tax. >>> Self employment tax is matching social security payments. >>> You pay both the individual ss tax and as well as the employers >>> contribution which comes to about double. >>> >>> If you were incorporated and you were an employee, which you would be, >>> you could collect half your pay in salary and the other half in >>> dividends, or 1/4 in salary and 3/4 in dividends (which yields a deeper >>> tax break) >>> >>> Dividends are not subject to the 2nd half of the contributing tax or the >>> self employment tax, never mind workers comp, state unemployment, etc. >>> >>> For those that rant and rave against the big bad government and their >>> unreasonable taxes (count me in), then it's foolish to voluntarily pay >>> what is not required of you. >>> >>> But to all those that do go ahead and pay the extra not required ss tax, >>> My family and all the rest of those who will someday collect ss in our >>> golden years thank you for being so generous as paying this extra >>> voluntary tax to help insure the solvency of ss so it will be there when >>> we retire as well as give the government even more money to borrow >>> against so they can spend even more tax dollars that really aren't there. >>> >>> Also, if you have a good cpa, they tell you this stuff when they do your >>> income taxes. >>> >>> a cpa is not a tax preparer or a book keeper. >>> >>> >>> >>> >>> >>> >>> >>> RickG wrote: >>>> Makes sense to me...thanks! -RickG >>>> >>>> On Tue, Jun 2, 2009 at 11:32 PM, Marlon K. Schafer <[email protected]> >>>> wrote: >>>>> Let me get my accountant wife to answer that one. Here's Melissa.... >>>>> >>>>> Well, for us it's not yet in our best interest to incorporate. >>>>> Sometimes >>>>> the reason for incorporating is to help insulate the individual from a >>>>> lawsuit - but usually if the corp is sued, they also sue the owner of >>>>> the >>>>> corp. I agree with you about the S-Corp - the income from an S-Corp is >>>>> picked up on your personal return so there aren't usually as many >>>>> advantages >>>>> when doing tax planning. We have not incorporated because the cost of >>>>> being >>>>> a corp (accounting, legal, another set of books, more time on Melissa's >>>>> part >>>>> to work on the books...) is greater to us right now than the benefits. >>>>> I >>>>> see it as something that we will probably need to do in the future as >>>>> our >>>>> income increases and we need to do more tax planning. Hope that >>>>> helps..... >>>>> Melissa >>>>> >>>>> There ya have it! >>>>> marlon >>>>> >>>>> ----- Original Message ----- >>>>> From: "RickG" <[email protected]> >>>>> To: "WISPA General List" <[email protected]> >>>>> Sent: Monday, May 25, 2009 12:02 PM >>>>> Subject: [WISPA] Legal Entity - which type? Was: Quesiton on Funding >>>>> /Financing / Capital Availability >>>>> >>>>> >>>>> Ha! Another interesting topic! In the past, when doing business for >>>>> myself, I legally filed as a sole-proprietor. When I got into the WISP >>>>> business, for a multitude of reasons, I became an "S-Corp". After >>>>> filing my taxes, it seems to be much simpler and possibly more >>>>> advantageous to just be a sole-proprietor. But that goes against all >>>>> advise I receive. >>>>> Marlon, I'm actually surprised that you are a sole-proprietor. What >>>>> benefits have you found by remaining so? >>>>> -RickG >>>>> >>>>> On Mon, May 25, 2009 at 11:54 AM, Marlon K. Schafer >>>>> <[email protected]> wrote: >>>>>> One more thing. I don't agree with your definitions per se'. >>>>>> >>>>>> We all have businesses. A proprietorship is a TYPE of business. We are >>>>>> a >>>>>> proprietorship because I'm not incorporated (incorporating is over >>>>>> rated >>>>>> and >>>>>> expensive to do right). I'm still a business though.... >>>>>> >>>>>> http://en.wikipedia.org/wiki/Business >>>>>> >>>>>> http://en.wikipedia.org/wiki/Sole_proprietorship >>>>>> >>>>>> http://en.wikipedia.org/wiki/Asset >>>>>> >>>>>> marlon >>>>>> >>>>>> ----- Original Message ----- >>>>>> From: "Charles Wu" <[email protected]> >>>>>> To: "WISPA General List" <[email protected]> >>>>>> Sent: Sunday, May 24, 2009 10:03 PM >>>>>> Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital >>>>>> Availability >>>>>> >>>>>> >>>>>>> Hi Marlon, >>>>>>> >>>>>>> I think it's appropriate to make a few definitions and distinctions on >>>>>>> things so everyone is on the same page >>>>>>> >>>>>>> Specifically, for purposes of making my point, I define >>>>>>> >>>>>>> Proprietorship: A commercial activity engaged in as a means of >>>>>>> livelihood >>>>>>> or profit >>>>>>> >>>>>>> Business: A unique system of processes and procedures that documents >>>>>>> and >>>>>>> codifies a specific method of proprietorship >>>>>>> >>>>>>> Asset: cash, inventory, equipment, infrastructure, customer contracts, >>>>>>> brand, marketing, etc >>>>>>> >>>>>>>> Grin. Sure it is. That's what a LOT of small business people do. It's >>>>>>>> also kind of common for doctors, dentists, plumbers etc.... Sometimes >>>>>>>> it >>>>>>>> sucks, >>>>>>> Now, everything you stated above is just a method of proprietorship, >>>>>>> and >>>>>>> in most cases, from a sale perspective, a proprietorships isn't worth >>>>>>> anything more than the depreciated value of its assets >>>>>>> >>>>>>> Say you were buying out the local plumber's office -- what would he >>>>>>> have >>>>>>> of value? His truck? Some old tools? A customer list / brand perhaps >>>>>>> (but the reality of things is that customers do business with him >>>>>>> because >>>>>>> of him, and if you bought him out and he moved out of town, those >>>>>>> customers would probably go back to being on the open market) >>>>>>> >>>>>>> Now, in comparing the WISP 'proprietorship' vs. the plumber, it's >>>>>>> worth >>>>>>> noting that the WISP is somewhat unique in that it results in the >>>>>>> creation >>>>>>> of an independent asset that holds onto a lot of value (e.g., the >>>>>>> recurring revenue and everything that goes to support it); in many >>>>>>> ways, >>>>>>> this is akin to real-estate >>>>>>> >>>>>>>> Not >>>>>>>> everyone out there even wants to get that big (if I had a nickle for >>>>>>>> every >>>>>>>> business owner that's told me the most fun they had and the most >>>>>>>> money >>>>>>>> they >>>>>>>> made was when it was just them, no employees......) But then again, >>>>>>>> that's >>>>>>>> one of the really cool things about this buisness, it's big enough >>>>>>>> and >>>>>>>> flexible enough to allow many different business models and operator >>>>>>>> dreams >>>>>>>> to bear fuit! >>>>>>> True...and you have the added benefit of building an asset that has >>>>>>> value >>>>>>> (be happy we're not plumbers =) >>>>>>> >>>>>>> -Charles >>>>>>> >>>>>>> >>>>>>> >>>>>>> >>>>>>> >>>>>>> -------------------------------------------------------------------------------- >>>>>>> WISPA Wants You! 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