undefined | Better HN

0 pointsmathrawka6y ago0 comments

Please correct me if I'm wrong, also I assume you are in the US...

    I did this for a while, but it starts to hurt around tax season. There are advantages
    to being incorporated and then hiring yourself as an employee for a minimal wage. With
    the way you're doing it, you're paying employment taxes on your entire income. With an
    LLC, you can pass the majority of it through without paying that.

So you are paying corporate tax rate on the profits of the company, then personal tax rate on your "minimal wage". How does the money from the company get passed to you without any tax hits?

0 comments

sbjustin6y ago

He's likely an llc taxed as an S-Corp. You don't pay taxes out of your business, profits after write offs are added to your return with a K1. You're likely thinking of a C-Corp.

maratd6y ago

Yes, that's exactly it. As an S-Corp the corporation doesn't pay any taxes. Well, in my case my state (New Jersey), has a minimum tax based on revenue. I pay that, but it's minimal. If it really bothered me, I could re-incorporate as a Delaware or similar LLC. All profits are passed to your individual return and you pay taxes on that.

mathrawkaOP6y ago

With the K1, you will be adding the passed through income to your personal income and still paying tax on it. I'm not seeing the benefit of an S-Corp here.

maratd6y ago

See my comment here: https://news.ycombinator.com/item?id=19527078

j / k navigate · click thread line to collapse

0 pointsmathrawka6y ago0 comments

Please correct me if I'm wrong, also I assume you are in the US...

    I did this for a while, but it starts to hurt around tax season. There are advantages
    to being incorporated and then hiring yourself as an employee for a minimal wage. With
    the way you're doing it, you're paying employment taxes on your entire income. With an
    LLC, you can pass the majority of it through without paying that.

So you are paying corporate tax rate on the profits of the company, then personal tax rate on your "minimal wage". How does the money from the company get passed to you without any tax hits?

0 comments

sbjustin6y ago

He's likely an llc taxed as an S-Corp. You don't pay taxes out of your business, profits after write offs are added to your return with a K1. You're likely thinking of a C-Corp.

maratd6y ago

mathrawkaOP6y ago

With the K1, you will be adding the passed through income to your personal income and still paying tax on it. I'm not seeing the benefit of an S-Corp here.

maratd6y ago

See my comment here: https://news.ycombinator.com/item?id=19527078

j / k navigate · click thread line to collapse