This video was incredibly helpful in my understanding how an LLC is different than an S-Corp. I also wanted to know how to pay myself if I go to S-Corp, and you touched on that, too. Thank you!
Thank you. I just opened an S Corp but I think I should have done C. I really only want to pay myself in Shares. I'm so new, I'm thinking of switching.
Good point! Yes I do plan to add more visuals / graphics in the future -- I agree they are also helpful to me in understanding and retaining information.
Hi Elizabeth, thanks for a very informative video. I'm planning to start a small home building company and have heard advice from C corp and S Corp and now really hearing this about LLC for the first time. I would not be an actual contractor but a subcontractor managing the process. Any suggestions for a recommended structure? Previously I was thinking S Corp but LLC sounds simpler but then you said it's easier to get credit with an S Corp or c Corp structured as an S Corp.
we open a corp company with out searching well, now we want to change the name of the company and maybe change it to llc. would you recomment me to do that or just close this company and open a new one ??
You can change the name just by a filing with the state (usually called an "amendment" to your incorporation documents) - that's pretty straightforward, then just need to change the name in your other places (banking, etc.). If you want to change from a corporation to an LLC, if you are already operating the business it makes sense usually to convert it with the state. If you haven't operated yet, might be easier to just shut it down (but if you are in California watch out for $800/year franchise fee - depends upon how long the corporation has been existing).
Thanks for breaking it down to plain English Elizabeth. Selected C-Corp based on the fundraising BUT the implications for founders that are non US residents are not clear, what are the top practical considerations?
Well mostly it will be around money stuff -- getting a bank account, paying yourself, and taxes. For example, many banks require you to open an account in person (not all of them, check out mercury.com/ ). Also, if your country does not have a tax treaty with the US, your salary / payouts may be subject to tax withholdings (like 30% - you can file a tax return to try to get that back but meanwhile they take out the money).
Hi Elizabeth. Thank you for making such great content. I wanted to know if it's a better option to elect to pay taxes as an S Corp with an llc than opening a new S Corp
love your videos... im just getting my wholesale dealer license(usd car sales to auctions or other car dealers only.. not to public) , would you know how these type of business are set up as? im thinking s corp but not sure..
3 Long question. Sorry. U mentioned c corporations can hold money in there after salary and all other corporate expenses paid to employees. C corp will pay tax on corporate earnings. 21%.earned that tax year. Money left in c corp name in the ank earned 5% and earned during that period. So corp will pay tax when filling next year? C Corp funds still not used for investment because waiting for right opportunity to invest. How long money not used for investment can be left in corp after employees paid. And any IRS publications that gives clear guidance and all rules to hold and distribute money to employees to minimize corporate and employee taxes?
Ah so the rule is that all owners need to be "individuals, certain trusts, and estates" who are not "non-resident alien" individuals. So my understanding is that if someone qualifies as a resident via SPT then that may work, but the problem is that they must keep being an SPT and that depends on behavior (someone could be SPT for only half of a year, for example, depending on what they are doing that year). I'm not an immigration attorney though, and they are the experts on that (or tax accountants perhaps.) I'd recommend speaking to your immigration attorney or tax accountant to make sure you can keep the right status for all the time the S Corp shares are owned.
Thank you so much for all videos, I watched a lot of videos but your videos are the best. I will start business online and maybe in future it'll be visual. My DBA still in process in Santa Clara county. Can I change in future from DBA to S Corp?
I love this video! I do have a question, if you don't mind ❤ Does a Sole Proprietor C Corp have to pay the Proprietor a salary? If so, what if it doesn't actually have the revenue to pay the Sole Proprietor?
Sole proprietor and C Corp are two different legal entity types. Maybe you mean a C Corp with one owner? No it does not have to pay the owner-as-employee because the C Corp itself pays taxes (double taxation).
at 3:43 when you are talking about the formalities (minutes for example) I am assuming you are talking about a Corporation, not an LLC that is taxed as a C-Corp or S-Corp or are you referring to those too? this should have like 100K views by the way
Minutes are a formality for corporations, but LLCs will have a bit of formalities too. Like if you want to do something (such as take out an SBA business loan), an LLC should have written documentation of that decision, usually in the form of "declarations" (but could be minutes of a meeting too) -- even if you are the only owner. Also "formalities" refers to having a separate bank account etc.
Make sure you never refer to your contractors as employees -- if they are "employees" you can't use the 1099 to pay them -- you'd need to run traditional payroll to pay them. But to answer your question, assuming you are an LLC, you'd need to run the numbers (or have a tax preparer run them) to see if the tax status savings of an S Corp makes sense in that exact situation.
Hi Elizabeth , I’m starting a business in Oxnard, Ca. I need help setting up the business. I would prefer to pay someone to guide me through it. Who would I go to? 1. I want it to be a LLC 2. Which mailing service can I use instead of my house address with the government 3. What and how to fill out forms 4. Which billing software is best 5. Which bank is best 6. Need to make a yearly service contract 7. What kind of legal service I should retain to help with business issues 8. What kinds of receipts to use 9. Which insurance company and type is best 10. I assume h&r block is the best for taxes
Hi - if you need this level of support, check out the Patreon membership www.patreon.com/elizabethpw . I also recorded some videos that include reviews of various service providers, and will be adding more: ru-vid.com/group/PLd0wcIHXfOTcqL6ltujdaMVrhn_IoNxdg
Hey Elizabeth as a Real Estate Investor that's engaged in active strategies like flipping or wholesaling im learning that for active income strategies, C Corps are a better entity to choose especially when speaking of the business growth and planning side. Because C Corp files separate , Banks, lenders don't know you're in business for yourself and buy getting the money out of the C Corp as a W-2 Salary, essentially you make yourself appear as a regular W-2 employee since most time banks scrutinize small business owners and love w-2 employees. So essentially you can control the narrative that's perrcieved of you. Which in this case makes qualifying for loans much easier to take down more deals. So although I may take a tax hit upfront, taking into consideration what im trying to accomplish (qualifying for loans much easier) I can have access to bank money with cheaper rates. From a Strategic standpoint, What are your thoughts?
That sounds good in theory, but banks will still know the C Corp is a small business. I assume that in this theory the C Corp itself is applying for a loan -- then in due diligence, they will look at the information and books of the company and see it is closely held by only one or a few owners. It is good that it is the corporation can develop its own credit rating, so eventually it can qualify for loans, but that is unlikely to happen on day 1 when it is new.
Hey Chris, I am the similar situation as a wholesaler/flipper. I was considering an S-Corp, especially I am obtaining revenue from another stream of income as a contractor. I never heard of anyone in this business or flipping/wholesaling doing s C-Corp. I am under the impression you can do what you want as an S-Corp and avoid to be double taxed as a C-Corp would.
I’m starting my real estate investment business but I’m so unsure as of which type to select, LLC or S-Corp. How are you guys doing it and what have been your experience?
I just recently form a LLC, and I am a 1099 independent contractor. My employer insist on paying me in my name and not into my LLC bank account because he hired me as a provider at his clinic and not my LLC. Would it be okay to deposit the paycheck in my name into my LLC? Thank you
Weird that the boss is doing that -- it is in their interest to pay an LLC - makes it more likely that you are a contractor. Anyway, I don't know if the bank will accept the deposit if it is made in your name and not the LLCs. Besides that, you may want to talk to a tax person because the main issue is you want to make sure that if your LLC or you were audited, this won't be rejected -- your boss will issue you a 1099 personally so the IRS will think you are personally going to pay the taxes on that check.
10:00 • VERY interesting...! Assuming S corps don't have access to this same benefit, why aren't S corps able to access similar or identical non-taxation benefits when such a business reinvests its profits without leftovers at the end of the fiscal year?
Well the S Corp owners will be taxed on the profits at the end of the year, even if they are reinvested (that's how the s corp pass-through taxation works). But the company doesn't have to distribute those profits -- the owners could pay the taxes out of their own pockets (or do a small distribution just to pay taxes) and then reinvest the profits into the biz.
Hello Elizabeth. Thank you for the video it was great. If I was looking to start an investment firm what do think would be the best LLC, s-Corp, or c-Corp? Thank you.
For most people, it works to start out as an LLC and then switch your tax status to LLC-taxed-as-an-S-Corp (if you qualify) once you are making a certain level of revenue.
Im just starting out with my hvac business and when I applied for my license I chose corporation. Now I don't know if I should of gone LLC or S corp. I was setup as C corp and I did have to pay that double tax and im a single owner lol. What advice can you give me, should I stay as a corporation? I do eventually want to grow my business to maybe mid size not too big. Thanks!
If my LLC is taxed as an S corp will I still be required to pay the $800 tax fee yearly? Also, how can I find out if Body Sculpting can become S Corp? and thank you so very much for all your video and help... so appreciated.
Yes both LLCs and S Corps (and C Corps) in California have to pay the $800/year minimum franchise fee. Well except that right now, the first calendar year is $0 for both. Since you don't need a medical license for body sculpting, it can be an LLC.
Great presentation in such a clear manner! Thanks. One question. As a physician in Calif who is going to work as a1099 independent contractor, I plan on electing to file as an s corp. Does it make a difference if I incorporate as an LLC or Pc? My reading from the sec state website and your video is that a physician can’t do an LLC, is that correct?
Hi Elizabeth, thank you for the amazing video. From my perspective being a foreign national residing outside the USA. Would it make more sense to go down the c corporation route that offers better legal protection vs. an LLC in Delaware?
The C Corp is best in certain tax situations and also if you are looking to go public or get outside investors. But many of my foreign clients go with a corporation because they are not comfortable with an LLC (since they don't have that in their own country)
I understand there are some limitations on one entity versus the other, but overall it seems that an LLC with S Corp election gives you the best of the two worlds. Or am I missing something?
@@ElizabethPW Thank you for your response. Another follow up, do LLCs taxed as S Corps get audited more than Corporations taxed as S Corps? I know there are many variables for audits but based on stats, do you have any recommendations on that?
Some states don't have an EIN for every business, but some do. Go to the state's corporate website, employer website, and/or their tax revenue website and look for info on a state tax ID
Depends on a lot of factors, but as I said in the video, usually my recommendation is LLC unless you are pitching outside investors (then it is C Corp)
Hello! Love all your videos, very helpful. I do have one question, I am a Creative Producer in CA, I provide creative consulting to my clients as well as work as a event and video producer. I have been working as a sole-proprietor but I want to file as an S-Corp for this year. Is it better to form a Corporation and elect as an S-Corp or file an LLC and elect as an S-Corp?
Generally I recommend an LLC that elects S Corp because an LLC is easier to run with fewer legal requirements (like having an annual directors meeting with minutes).
Hi Elizabeth, thank you very much for this video. As a non-US resident looking to form a legal entity with no partners that will work with Amazon, Walmart, eBay, …. Etc. and in the e-commerce business, in general. Need your advice with should I go with single-member LLC but all these platforms do not confess to this type of entity and you can't put the name of the LLC on the storefront you only put the owner's name which is not professional at all also put in consideration the taxation OR can I go with the LLC and be elected as S-corp (I hope as non-resident) or C-corp Which is better considering: 1- Easy to manage 2- Protection 3- Not expensive to maintain 4- Best Taxation 5- Is there anything else I should consider? Thank you again
The Vanessa person who is replying to this message is posting spam - they have no affiliation with me. Spam comments/replies get deleted, to the extent they are found.
One aspect to know is that an S-Corporation can only be owned by someone who is a US citizen or legal resident. So if you are not, then you are picking between an LLC taxed as a sole proprietorship, an LLC taxed as a C Corp, or a corporation taxed as a C Corp. I recommend you speak with a tax person or an accountant about which tax status is best for you. Many of my foreign clients use a corporation taxed as a C Corp because that is more common in their own country, and easier to explain.
you might try this company freedomtaxaccounting.com/services/international-tax-services/ - they work with international clients and can also help with getting the EIN and ITIN when you're outside the USA
Your video was precious, and I have a question about S Corporation compared to LLC. Does it protect the individual owner, and is it better than LLC in terms of paying taxes, according to the articles I read. Do you think Amazon S Corporation is suitable for business?
An LLC and an S Corporation both protect the owner. Yes you can save money on taxes with an S Corporation, but that only happens if you are making enough money to take advantage of it (usually in the high five-figures of profit), because an S Corp has additional costs in the complexity of it. If you are just starting out, an LLC may be better (that you can elect for it to be treated as an S Corp later).
How would you incorporate if the idea is for a social purpose to make a difference but don't want a Non profit because the business that will be run will make a profit but the money will be used to make a difference?
Many states have "social purpose" or "social benefit" corporations, where the purpose of the company isn't just profit, but also some social purpose. Here's an article about it: nonprofitlawblog.com/california-social-purpose-corporation-an-overview/
Thank you! for all the information. I am opening a small business in California as an LLC but will be filing taxes as an S Corp. Can I still manage my small business as an LLC or will I be required to have a board of directors, hold meetings, record minutes, etc...? Appreciate your feedback. Thank you!
Great question - you manage it as an LLC for the most part. The only difference is for tax related things, where you file S Corp tax returns and distribute profits (via salary and distributions) per the S Corp rules.
Hi. Great video. I have a sole prop LLC at this point. I was in real estate for many years and have now moved into insurance. No more real estate. Can I or should I keep my LLC sole prop the same or are there any changes you would advise or hurdles I will encounter? I'm a 1099.
HI Elizabeth, I learned from your video that you can classify your business as an LLC but still file as an S-Corp. What are the advantages of doing this versus classifying and filling as an S-Crop?
The tax classification as an S Corp is about taxes -- if you are making enough profit, you can pay yourself part a salary (regular payroll taxes) and then part distributions (income tax but no fica/self-employment tax).
Anyone can be the owner of a C Corp ... for an S Corp it is about being a legal resident (which could be a green card but there are other legal resident status)
I have a question?? If I wanted to start my own boutique BUT I wanted to buy items offline and design/ bedazzled a item I got offline what would I need? A LLC , or S CORP or C CORP ??
Thanks for your video!! Very helpful! When you pay yourself to file C-corp can you pay yourself as a 1099 contractor or does it have to be as an employee?
Hm in theory an owner could pay themselves as a contractor but it would need a lot of paper trail to show that it was a legitimate transaction and not set up to avoid taxes. As a C Corp you'd usually pay yourself as an employee and pay yourself dividends on the stock.
Ah well generally the IRS will require you pay yourself as an employee some reasonable salary because they want to see the taxes taken out -- it would be a red flag to not do that
Hi appreciate your video! What would you recommend for someone who is buying his own tractor and own trailer reefer to move freight to run as a solo person business
Thanks for the video! I have a plan to put cars on Turo for rent, but in order to get some decent capital I was hoping to get a seizable loan. I realize that it's easier to get a loan with a business, so I'm not sure which entity would fit my situation best. Do you have any recommendations?
Hi Elizabeth, I am starting my company selling cosmetics on my website and then eventually cosmetics and clothing but not sure if i should start as an LLC or C- Corp please help
@@ElizabethPW thank you wait is Angel funding like grants I don’t have to pay back? Because I am planning on applying for grants to get by business of the ground to buy the cosmetics I will sell online…
Thank you & Good morning . I was advice as NP IN CA by bizfileonlone CA of State to file that the Entity form should be General Stock of Corporation instead of P.C? Is this true or there missing something? I will still be supervise by MD but not working directly with them
thank you so much for sharing. I just confuse with the California Franchise tax for LLC taxed as S-corp (IRS form 2553). CA will treat my LLC as S-corp or as LLC for this situation? $800 + LLC fees (depend on revenue) is it correct? or 1.5% income?
If you elected with the IRS to have your LLC be taxed as an S Corp, then yes California also recognizes it. It will be the $800 franchise fee (which is a minimum tax), unless you make a lot of income and then it is the % (which would be more)
If you have a one-owner business and are considering whether you should stay a sole proprietorship or form an LLC, here's the video to watch: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-5ClAJYWTLRA.html
Hi Elizabeth, great video. My question I am starting a new business filed as an LLC. My business will have at least one employee working 30 to 40 hours weekly. I will continue my corporate job to help fund some upstart costs. My business will continue to grow by adding 2 to 3 people over the next 6 months. Since I will not be getting paid through the LLC is an S Corp a good option since payroll will be issued for future employees?
Hm I don't see having the LLC be taxed as an S Corp to be particularly helpful when the business is not making a profit. It really only makes sense to have an LLC be taxed as an S Corp when there is enough profit to make tax planning a big savings. Either way, any profits will be allocated to you (since it is pass through) even if you don't take a distribution or salary.
Im gonna start an etsy shop selling digital products as a start. I was told to purchase an llc, im the only gonna be main business owner. Would an S corp be ideal for me?
Typically an S Corp only makes sense if your business is making a lot of profit (like high five figures) or you need it for some particular other reason. You can start with an LLC and then change it to be taxed as an S Corp later (but it is still legally an LLC) -- LLCs are very flexible that way
@@ElizabethPW gotcha. I'm a new business owner. I'm not sure how much I'll make as I haven't sold anything yet. Oh I didn't know you can change from llc to S Corp later on. Ty
Thank you for this informative video! Here's my question. I am a Licensed Educational Psychologist (LEP) licensed in California. After 11 years of working in the pubic schools, I want to go into private practice. Can I form an LLC? Our professional organization (California Association of School Psychologists-CASP) seems to recommend an S-Corp, but I know that therapists in California can't form LLCs, and have to form professional corporations. Do these same rules apply to LEPs? I am just so confused!
Yes since LEPs are licensed under the Business & Professions Code (section 4989.20) then the only options for a one-owner practice are sole proprietorship or professional corporation. Also, it can be a professional corporation that is taxed as an S Corp (the S Corp is the tax thing, not the legal thing).
I'd recommend talking to an accountant to see if the tax status matters for your particular business. Usually an LLC taxed as an S Corp is the best fit but occasionally a business should be a C Corp, and sometimes people are better off with the LLC taxed a pass-through-sole prop.
It really depends on the owners and the financial/tax setup. My general recommendation is an LLC taxed as an S Corp, but it does depend on who the owners are and the revenue.
I'm not quite sure what you mean, but you'd create the corporation with the state, then get the EIN for the corporation, then file the paperwork to elect it to be treated as an S Corp
Hello, I’m in NY and I just opened up a LLC for my husband and I to provide transportation services. How can we pay him a salary and how can we lower the amt of taxes we’re paying? He started working under his friend’s LLC co in March 2022 and didn’t put aside taxes, now he owes over 10,000
To be able to do more tax planning, you would elect for the LLC to be taxed as an S Corp www.irs.gov/forms-pubs/about-form-2553 and then you can run payroll for him - you may also want to talk to an accountant or tax person who can negotiate with the IRS for you to set up payments
Hi! I want to start a small business selling candles. I would be the owner and only worker until my daughter is older. I want to leave it for my daughter when I’m no longer here. I’m still a little confused. What would you recommend?
Hi - if you want the business to exist after you are gone, then you'd want to create either an LLC or corporation. All things being equal, I'd recommend an LLC specifically, because the logistics are a bit easier.
I am setting up an S Corp and I believe it will be taxed as an LLC...Can I do that? I am going to the Northwest services website. I am not sure if my company name on their website should be , Inc or , LLC. Can you advise? Great videos!
I guess I should add it is a financial planning business and 1099s are received in our personal name, not in the name of the business. After looking through comments, that might be an issue.
So LLC isn't a tax status. You can have an LLC taxed as a sole prop, or an LLC taxed as an S Corp or C Corp. You can have a Corp taxed as an S Corp or a C Corp. If you form an S Corp, then you'd update your W-9 with whoever gives you the 1099s with the corporate info.
I’ve been trying to learn this stuff for ages but it still never makes any sense to me.. so you register as an LLC and then chose an option on how to be taxed?
Hello! I am a hairdresser making about 100k a year of course with expenses. I am transitioning to opening a Business under s corp and INC. Does that sound right if I’m the only owner and employee right now under my business? It’s what I got recommended by a cpa. Not sure if LLC was best Thank you!
It can be an LLC taxed as an S Corp, or a corporation taxed as an S Corp. Yep you'd want the CPA to let you know if it will save money on taxes, since they have your actual numbers
Hello I am a licensed esthetician wanting to start my own business and I’m still unsure if I fall under the “professional” category that disqualifies me from an LLC. Also don’t know if a C corp or S corp is better for me.
So it does depend on your state -- in some places an esthetician would be part of the "licensed" professionals who are required to get a professional corporation (or in some states, a professional LLC). Most likely your licensing board would tell you. Generally you'd want an S Corp unless there is a special reason you want a C Corp (you'd probably know if you had a special reason).
Hey Elizabeth, I’m just starting up my content creation business via gaming mostly on twitch and RU-vid as well as ebook publishing. I’m in the process of submitting my form 8832 and im so torn and a bit stressed as to what to get taxed as, I was honestly wondering what you’d suggestion for someone whose a single owner but also someone who wants to take advantage of tax writes off on things to start up my business such as editing software and equipment as well as potential travel write offs for traveling for collaborations. I plan on being a one man band until I can find serious business partners in the future. Thank you
I assume you have created an LLC and are thinking of submitting a form 8832 to have it taxed as a corporation. Many items like travel, start up expenses, ordinary expenses -- they are deductible against income if your LLC is taxed as a sole prop or as a corporation. There are tax savings for corporations but they tend to not kick in until the business is making more revenue and profit. Now there are unique situations where a corporation tax status makes sense from the beginning, but you'd want to chat with a tax person to see if those apply to you. (Will be hard to get a tax person appointment right now in late March / early April, though.)
@@ElizabethPW Thanks for thé response and can I always change from sole proprietor to an S Corp ? I’m just starting out so I don’t think the S Corp is the right move at this very moment, however I will book with you when you get some free time.
We just want to make sure it’s done right and we don’t miss anything. Once we get the LLC we will obtain an EIN and open a bank account with that EIN. We will run all the money through that bank including paying herself from that account. Am I missing something?
Yes if she is the only one, the default tax status is an LLC taxed as a sole prop. Yep you get the LLC, then the EIN, then a bank account, and run the $ through that. You may also need other business setup (business license, etc.) depending on where you are located
Hi - I'm not taking new clients right now, but I will have a livestream Q/A on October 25th and also I will be opening up my Patreon soon (which will include discord DM, Q/As, and even calls at the higher level) - so check that out if you'd like to get questions answered there
Yes. For an S Corp, the owner may pay themselves two ways -- via payroll for the work they do as owner-employee, and via distributions as an owner. For payroll, normal taxes are taken out. For distributions, the owner gets a K-1 at the end of the year and must state that income and pay taxes on their personal tax return.
Hi great vid i am a real estate investor and buying properties and renting them out. I am currently registered as an LLC. Is an s or c corp a better option?
You'd need a tax person to crunch the numbers for your particular situation, because you only want to change to an S Corp or C Corp status if it saves taxes (and it might not). Much of the time, an LLC that holds real estate is better to be taxed as a partnership (or sole prop, if one person).
I have an LLC and I got approved after i filed 2553 to be an S corp ... should I change my State OF California LLC to s corp on state secretary page. if so which form. the forms on your videos show more options under Forms. also on form its conversion entity is changing state .? please help thanks
Shalom, Elizabeth. I'd like to have my business as S.P. Is it possible to also have it as an S-Corp? Should I obtain other employment, am I permitted to utilize my company's credentials, as entity, for taxes or payments/ checks? Thanks in advance 😊.
If you have your business as a sole proprietorship, then it is an SP for both legal and tax purposes. To have a business be taxed as an S Corp, you'd need a corporation, LLC, or partnership. But you can use your SP business to run payroll, pay expenses, or write checks -- you'd just want to get a business checking account.
My understanding is that an estheticians has to have a sole proprietorship or a professional corporation, because they are licensed under the "Business and Professions Code" - but I recommend asking your licensing board people, they would likely know what is done in the profession