@companyor wrote:
Why would anyone pay 40% tax when C-Corp only has to pay 21% tax?
For starters, you must pay yourself a fair wage as compensation for the work you perform for the corporation. That salary goes on a W-2, and is subject to regular income tax on your personal tax return, plus social security and medicare withholding, plus the corporation pays matching employment taxes. You can only pass the "profits" to the "shareholders" (i.e. you) after you have paid yourself a fair market wage (what you would have to pay an unrelated person to run the business for you). Failing to pay the corporate owners a fair salary is one of the most common issues the IRS audits.
