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Self employed
Question 1
When you say making partners W2 employees could save on self-employment taxes, could you expound on that a little bit? My understanding is that if roughly a third of our gross income goes to taxes as self-employed partners, employees would pay roughly half that (a sixth deducted from checks) and the employer (us) would pay the other half (+unemployment and other taxes/fees). Is that accurate?
Yes this is accurate.
Is the total sum of taxes paid from income the same, just divided among employee and business? If so, per questions 1 & 2 above, as self-employed partners, we can reduce that burden by deducting our personal investments and home office etc.
This is correct. You can deduct unreimbursed expenses during input of K1. The program will ask: do you have any unreimbursed expenses ( home office etc) from partnership.
As employees, I'm assuming the business would be the only entity making those deductions. Are there other benefits to employment that I'm not thinking of?
As your business stands right now. I see no benefit of being W2. It is a simple pass through entity. It is set up with it's own benefits.
What I was referring to was making an scorp election for your partnership! It's something to look at. This does come with additional compliance steps as far as taxes and payroll. If you organize your business as an S-corporation, you can classify some of your income as salary and some as a distribution. If you organize your business as an S-corporation, you can classify some of your income as salary and some as a distribution. You'll still be liable for self-employment taxes on the salary portion of your income, but you'll just pay ordinary income tax on the distribution portion. Depending on how you divide your income, you could save a substantial amount of self-employment taxes just by converting to an S-corporation. Here is a good article explaining in more detail. https://turbotax.intuit.com/tax-tips/small-business-taxes/how-an-s-corp-can-reduce-your-self-employm...
Here is an article on how to do it. https://turbotax.intuit.com/tax-tips/small-business-taxes/can-i-convert-my-llc-to-an-s-corp-when-fil...
Your partnership is just getting established. You are learning bookkeeping and taxes for partnership. This is great. Once you have gotten bookkeeping and Business taxes Understood and in compliance, I would look into scorp election for a future tax planning.