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I need help in deciding what type of corporation to set up - S Corp or LLC?Also do I need a business license for Texas?

Asked almost 3 years ago - Dallas, TX

I am an indep contractor/manufactuer rep for a Calif based Piano Corporation. I am given a 1099 at the end of the year. I want to pay my spouse wages for the work she does for me. This is the sole purpose of setting up the corp. I travel several states. I do not pay Calif state income taxes. Nor do I receive wages from the state of Texas or any other state I travel.

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Attorney answers (2)

Michael Duane Cross Jr.

Reputation Level 10

Answered almost 3 years ago. Corporate / Incorporation Lawyer in Alpharetta, GA.

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STANDARD DISCLAIMER - I'm not your attorney, and this isn't legal advice.

I love LLCs for many reasons and have to be convinced to choose something different. I think your best bet is to form an LLC that makes an S election. This should allow you the protection LLCs provide regarding charging orders, and also allows you the opportunity to minimize (self-)employment taxes (including Medicare and Social Security taxes).

Texas used to have some goofy taxes on LLCs. I believe those were eliminated in 2006. Check with a Texas business/corporate attorney before making your decision.

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Lev Konstantyn Martyniuk

Reputation Level 11

Answered almost 3 years ago. Corporate / Incorporation Lawyer in Cincinnati, OH.

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She has to perform real services for the LLC or S Corp or else the IRS can come back in an audit and disallow the deduction that you would be taking on the corporate return for the wages paid to her. So keep it legit.

Also, to decrease the employment taxes the entity would have to be an S Corp, C Corp or an LLC electing S status. You should talk to an tax attorney or cpa about getting this right. If you do the $$ right a C Corp could result in less taxes on the entire amount.

Disclaimer. I am not your lawyer. The information provided is merely for educational use. Contact a lawyer in your state.

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