Solved: Should I elect S-corp tax treatment for a Single m...
cancel
Showing results for 
Search instead for 
Did you mean: 
evgirl
Returning Member

Should I elect S-corp tax treatment for a Single member LLC with no employees?

I just opened a single member LLC for a side business as a consultant. Should I elect S-corp tax treatment or just keep it as a standard SMLLC? I have no employees and I already pay payroll taxes through a W2 job and make $250k. I am a NYC resident.

 

I would like to "pay" myself only if I actually make money in the LLC. However, if it works out more beneficial from a tax perspective with a S-corp tax election to pay myself a regular salary, I would. 

 

My concern is would I save actually taxes with an S-corp election while keeping the liability separate in an LLC?  I will set up separate bank and credit card acc's of course. Or should I just let it remain a standard SMLLC?

 

Thank you!

1 Best answer

Accepted Solutions
MWilka
Level 1

Should I elect S-corp tax treatment for a Single member LLC with no employees?

In my opinion, if there are no employees and you already cover your primary taxes through a separate source, I would not set up the S-Corp.  Just monitor the income and make the estimated tax payments if needed on the LLC and use the Schedule C to keep it simple. 

View solution in original post

2 Replies
MWilka
Level 1

Should I elect S-corp tax treatment for a Single member LLC with no employees?

In my opinion, if there are no employees and you already cover your primary taxes through a separate source, I would not set up the S-Corp.  Just monitor the income and make the estimated tax payments if needed on the LLC and use the Schedule C to keep it simple. 

View solution in original post

Carl
Level 15

Should I elect S-corp tax treatment for a Single member LLC with no employees?

If you elect S-Corp status, it can be more of a hassle (and more cost) than it's worth. First, in order to be treated like an S-Corp, the business must act like an S-Corp. That means the business has to follow all the rules and laws of the federal government and your state that an S-Corp is required to follow. You're required to take minimum draws every year. You "could" be required to make quarterly filings with your state every year too.

The penalties for non-cimpliance as an S-Corp are also considerably higher. For example, an S-Corp tax return is due to the IRS my March 15th of each tax year. The late filing penaly is up to $210 per month, per owner/shareholder.

For a simple consulting business that has no employees and carries no inventory, you'd just be creating a lot of additional paperwork with nothing extra to show for it. But I am no tax expert by any stretch. So you might want to consult with a business tax professional in whatever state your LLC is presently registered in, or will be registered in.

 

v
Privacy Settings