LLC single member or Scorp

[Mo__]

When does it make sense to chose one over other? I am currently using sole mbr llc that I have used for the consulting work. However I recently opened a shop as well.

Also, with sole mbr I can continue to use home & biz? And with SCORP I need to file separately?

[ColeenD3]

Yes to all above. An LLC is considered a disregarded entity, which means a business entity with one owner that is not recognized for tax purposes as an entity separate from its owner. You have a choice on how you wish to be taxed, as a Sole Proprietorship or as a Corporation. Once you choose to be taxed as a corporation, you have to file a business return, on the Business program.

If you choose Sole Proprietor, then you can continue to use Home and Business. It is much easier, tax-wise to have an SP. However, you may potentially avoid some SE tax by having a portion of your income on a Form K-1S as an S-Corp.

You would have to elect as a Corporation and then file Form 2553.

Form 2553

[Mo__]

I am still not very clear from tax perspective which one is beneficial. Currently we are not making profits but sometime, hopefully, later this year we might start to make money. Does it make more sense to have s-corp when are making profits as it would be taxed lower? And if not then as sole member so that expenses can be used as tax savings on individual return?

[RobertG]

Profits and losses from an S-Corp flow through to the shareholders individual returns and are taxed the same.  

Profits from an S-Corp are not subject to SE tax, but if you are paid for consulting work, that income should be reported on a W-2 to yourself, since it is compensation for services, and not really corporate profit.  

This is a big issue with the IRS if the income is significant.

[AmeliesUncle]

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@Mo__ wrote:

I am still not very clear from tax perspective which one is beneficial. 

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It depends on your specific circumstances.  Please DON'T make an election to be taxed as a corporation unless you sit down with a tax professional to analyze your ENTIRE situation.

[DaveF1006]

Yes, this is also a legal question rather than a tax question that is not addressed here in community.