Not sure your relationship to the taxpayer, but this individual should not be making an entity decision choice simply based off whether their income level is over or under $100,000.
A few comments:
- If you have a SMLLC converting to a sole shareholder S corporation, this will not automatically save on taxes. Someone needs to actually run the numbers.
- There needs to be a decision as to a reasonable salary paid to the shareholder. Who is going to handle the payroll filing requirements. There is a cost here.
- Fringe benefits need to be considered as most of these will be deemed compensation to the shareholder.
- S corporations are a focus of the IRS as they specifically look at the reasonable compensation issue. This could be a cost if audited.
- There is a cost of an extra tax return, tracking of basis, etc.
- What is the impact of the qualified business income deduction (QBID) on the entity selection.
- I don't believe this decision should be made without having a one on one with a tax professional.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
