im about to become self employed and need advice
Any Court will look at your income from any of these entitites as you will need to disclose your ownership. And, whether your income is flowing through to you, or being held within the entity (i.e. C-Corp), it will be obvious to the Courts what you are trying to do.
That being said, income retained within a C Corp (or an LLC electing to be taxed as a C Corp) will not appear on your personal tax return directly. Income from a flow-through LLC (whether a disregarded entity or one taxed as a partnership) or an S Corp will be reflected on your personal tax return.
Your decision as the entity you choose should be based upon factors other then child support obligations. You should have a consultation with a tax attorney or a CPA to provide you with the tax and/or financial consequences of each form of business. Also, consult with an attorney regarding limited liability.
This answer is provided for general information only. You should seek advice from an attorney in your jurisdiction. Good luck. Marty Davidoff, [email protected], 732-274-1600
Indeed, as Attorney Davidoff has pointed out, your choice of business entity should not be made based upon how it may or may not affect your child support obligation. As to child support, any good attorney and most judges and support magistrates will cut right through the form of your business to the substance of your income and assets for purposes of determining your child support obligation. Moreover, any choices you make concerning the business that tend to diminish or postpone income will be scrutinized to determine whether other choices might have resulted in a larger portion of income/assets being available for child support purposes, and if so, your child support obligation may be calculated as if you had made those other choices. Speak with a local attorney about your child support and speak with a CPA about your tax issues relative to your business. Good luck!
Ms. Brown may be reached at 718-878-6886 during regular business hours, or anytime by email at: [email protected] All of Ms. Brownâ€™s responses to questions posted on AVVO are intended as general information based upon the facts stated in the question, and are provided for educational purposes of the public, not any specific individual, and her response to the question above is not legal advice and it does not create an attorney-client relationship. Ms. Brown is licensed to practice law in New York. If you would like to obtain specific legal advice about this issue, you must contact an attorney who is licensed to practice law in your state.
Can't tell what you intend to do to relate those two, ie. "an entity" and "child support"
Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal Specialization PATENTAX.COM This communication is general information and not legal advice, and does not create an attorney-client relationship. This communication should not be relied upon as any type of legal advice. Please note that no attorney-client relationship exists between the sender and the recipient of this message in the absence of either (1) a signed fee contract and (2) remission of an agreed-upon retainer. Absent such an agreement and retainer, I am not engaged by you as an attorney, nor is any other member of my law firm.
Ditto on the prior answers. On the entities, the default classification on a single member LLC is a disregarded entity, so income and expenses flows on the Form 1040 as if the LLC did not exist. Unless the business is real estate rents, you will be paying Self Employment tax at 15.3% on top of the 35% max income tax. C Corp pays an income tax and you get taxed again if you do a dividend, so take income out as a wage, but you still have to pay FICA, which is just a substitute for the SE tax. The S corp would be obsolete, except that the SE tax can be adjusted, but you need a clever CPA to know what to do....and the IRS doesn't like it.
No client-attorney relationship is being created by this posting. Please contact an attorney with questions about your case.
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