I 'm operating as a sole proprietor. Goal is to save money on taxes. Would I save more as an LLC with S Corp election or S Corp?

New York, NY Viewed 46 times. Posted 3 months ago in Business

I don’t mind doing extra paperwork & book keeping if I can save more on taxes.

Additional information
1. I like the idea of profits being split between salary and & S Corp dividend distributions.
2. I'd rather not be subject to self-employment tax.
3. I want to shield personal savings and investments.
4. I’d like to deduct my high health insurance premiums.
5. I am a 1 employee company and plan to stay this way, so although more paperwork is OK, less complexity is always best. Again, it all really depends on the savings.

But it's not clear to me what the benefits are between registering as an LLC with an S Corp election or registering directly as S Corp.

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Answers (1)

Ronald Anthony Sarno

This attorney is licensed in New York and 1 other state. Posted 3 months ago.

The option may not help you at all. Salary, retained earnings and dividend distribution are all subject to state and federal taxes. Avoiding social security taxes is not a wise move, and the IRS penalties and fines for doing this are much higher than any tax saving. Once health benefits are defined as an employee benefit, they are deductible as legitimate business expenses. Most NYS businesses find the LLC option the best choice for other reasons than tax saavings. You need to discuss your options with a tax accountant and NYS business lawyer before you make options which will hurt you financially.

If you access my avvo profile you will see several legal guides which may help you with this problem.
I recommend the legal guide(s) on taxes and hiring a lawyer.

My law firm may be able to assist you with this legal problem. You can get contact information by accessing our website. www.sarnoanddefelice.com or my profile on avvo.

LEGAL DISCLAIMER…………………………………………..………………………………………………………………..
Mr. Sarno is licensed to practice law in NJ and NY. His response here is not legal advice and does not create an attorney/ client relationship. The response is in the form of legal education and is intended to provide general information about the matter in question. Many times the questioner may leave out details which would make the reply unsuitable. Mr. Sarno strongly advises the questioner to confer with an attorney in their own state to acquire more information about this issue.