{"id":7292,"date":"2019-06-25T16:57:34","date_gmt":"2019-06-25T20:57:34","guid":{"rendered":"https:\/\/www.argentplacelaw.com\/?p=7292"},"modified":"2022-12-19T17:38:42","modified_gmt":"2022-12-19T22:38:42","slug":"elect-s-corp-tax-status-when-you-start-your-llc","status":"publish","type":"post","link":"https:\/\/www.argentplacelaw.com\/2019\/06\/elect-s-corp-tax-status-when-you-start-your-llc\/","title":{"rendered":"Elect S-Corp Tax Status When You Start Your LLC"},"content":{"rendered":"<p><iframe src=\"https:\/\/www.youtube.com\/embed\/JnwFmtRaszU?rel=0\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">\ufeff<\/span><\/iframe><\/p>\n<p>When you start your new limited liability company (LLC) and get an EIN from the IRS, you may elect to be taxed as an S-Corp. In most case you should file that election. The Form is 2553.<\/p>\n<p>The default way for new businesses to be taxed at the federal level is either:<\/p>\n<ul>\n<li>If you are the only owner, the company will be disregarded and you&#8217;ll report the company&#8217;s income a Schedule C of your personal return. You&#8217;ll have to pay self-employment tax on the entire net income, whether you withdraw the funds from the company or not.<\/li>\n<li>If you have one or more partners, the company will have to file an informational tax return, but again all of the net income will flow through to the owners and you&#8217;ll have to pay self-employment tax on all of it.<\/li>\n<\/ul>\n<blockquote style=\"background-image: none;\"><p>Does your company have an operating agreement? If not, <a href=\"\/appointments\/\">schedule a consultation with us<\/a> to learn how we can help.<\/p><\/blockquote>\n<p>But if you elect S-Corp filing status, you (and your partners) may be employees of the company and collect a salary, which is deductible to the company. Any net income you leave in the company will not be subject to FICA. Not having to pay FICA on $10,000 retained earnings saves your company approx $1500 that could be used to pay for marketing (or to hire a lawyer-HA!).<\/p>\n<h2 style=\"font-size: 28px; font-weight: bold; text-transform: capitalize;\">Want to find out if S-Corp election is right for you?<\/h2>\n<p>Fill out this checklist and we&#8217;ll get back to you with a <strong>detailed analysis of the results of your answers<\/strong> and a final <strong>recommendation based on that analysis<\/strong>:<\/p>\n<script type=\"text\/javascript\">var gform;gform||(document.addEventListener(\"gform_main_scripts_loaded\",function(){gform.scriptsLoaded=!0}),window.addEventListener(\"DOMContentLoaded\",function(){gform.domLoaded=!0}),gform={domLoaded:!1,scriptsLoaded:!1,initializeOnLoaded:function(o){gform.domLoaded&&gform.scriptsLoaded?o():!gform.domLoaded&&gform.scriptsLoaded?window.addEventListener(\"DOMContentLoaded\",o):document.addEventListener(\"gform_main_scripts_loaded\",o)},hooks:{action:{},filter:{}},addAction:function(o,n,r,t){gform.addHook(\"action\",o,n,r,t)},addFilter:function(o,n,r,t){gform.addHook(\"filter\",o,n,r,t)},doAction:function(o){gform.doHook(\"action\",o,arguments)},applyFilters:function(o){return gform.doHook(\"filter\",o,arguments)},removeAction:function(o,n){gform.removeHook(\"action\",o,n)},removeFilter:function(o,n,r){gform.removeHook(\"filter\",o,n,r)},addHook:function(o,n,r,t,i){null==gform.hooks[o][n]&&(gform.hooks[o][n]=[]);var e=gform.hooks[o][n];null==i&&(i=n+\"_\"+e.length),gform.hooks[o][n].push({tag:i,callable:r,priority:t=null==t?10:t})},doHook:function(n,o,r){var t;if(r=Array.prototype.slice.call(r,1),null!=gform.hooks[n][o]&&((o=gform.hooks[n][o]).sort(function(o,n){return o.priority-n.priority}),o.forEach(function(o){\"function\"!=typeof(t=o.callable)&&(t=window[t]),\"action\"==n?t.apply(null,r):r[0]=t.apply(null,r)})),\"filter\"==n)return r[0]},removeHook:function(o,n,t,i){var r;null!=gform.hooks[o][n]&&(r=(r=gform.hooks[o][n]).filter(function(o,n,r){return!!(null!=i&&i!=o.tag||null!=t&&t!=o.priority)}),gform.hooks[o][n]=r)}});<\/script>\n                <div class='gf_browser_safari gform_wrapper gform_legacy_markup_wrapper gform-theme--no-framework' data-form-theme='legacy' data-form-index='0' id='gform_wrapper_7' style='display:none'><form method='post' enctype='multipart\/form-data'  id='gform_7'  action='\/wp-json\/wp\/v2\/posts\/7292' data-formid='7' novalidate>\n                        <div class='gform-body gform_body'><ul id='gform_fields_7' class='gform_fields top_label form_sublabel_below description_below'><li id=\"field_7_3\" class=\"gfield gfield--type-select gfield_contains_required field_sublabel_below gfield--no-description field_description_below gfield_visibility_visible\"  data-js-reload=\"field_7_3\" ><label class='gfield_label gform-field-label' for='input_7_3'>Are you going to use this company only to invest in real estate (or other passive investments)?<span class=\"gfield_required\"><span class=\"gfield_required gfield_required_asterisk\">*<\/span><\/span><\/label><div class='ginput_container ginput_container_select'><select name='input_3' id='input_7_3' class='large gfield_select'    aria-required=\"true\" aria-invalid=\"false\" ><option value='' selected='selected' class='gf_placeholder'>---<\/option><option value='Yes' >Yes<\/option><option value='No' >No<\/option><option value='Not Sure' >Not Sure<\/option><\/select><\/div><\/li><li id=\"field_7_4\" class=\"gfield gfield--type-select gfield_contains_required field_sublabel_below gfield--no-description field_description_below gfield_visibility_visible\"  data-js-reload=\"field_7_4\" ><label class='gfield_label gform-field-label' for='input_7_4'>Do you have any co-owners who are foreign nationals and don&#039;t live in the USA?<span class=\"gfield_required\"><span class=\"gfield_required gfield_required_asterisk\">*<\/span><\/span><\/label><div class='ginput_container ginput_container_select'><select name='input_4' id='input_7_4' class='large gfield_select'    aria-required=\"true\" aria-invalid=\"false\" ><option value='' selected='selected' class='gf_placeholder'>---<\/option><option value='Yes' >Yes<\/option><option value='No' >No<\/option><option value='Not Sure' >Not Sure<\/option><\/select><\/div><\/li><li id=\"field_7_5\" class=\"gfield gfield--type-select gfield_contains_required field_sublabel_below gfield--no-description field_description_below gfield_visibility_visible\"  data-js-reload=\"field_7_5\" ><label class='gfield_label gform-field-label' for='input_7_5'>Will you have any co-owners who won&#039;t actually be working in the company, i.e. they are just going to put money in and expect you to operate the company to give them a return on their investment?<span class=\"gfield_required\"><span class=\"gfield_required gfield_required_asterisk\">*<\/span><\/span><\/label><div class='ginput_container ginput_container_select'><select name='input_5' id='input_7_5' class='large gfield_select'    aria-required=\"true\" aria-invalid=\"false\" ><option value='' selected='selected' class='gf_placeholder'>---<\/option><option value='Yes' >Yes<\/option><option value='No' >No<\/option><option value='Not Sure' >Not Sure<\/option><\/select><\/div><\/li><li id=\"field_7_7\" class=\"gfield gfield--type-select gfield_contains_required field_sublabel_below gfield--no-description field_description_below gfield_visibility_visible\"  data-js-reload=\"field_7_7\" ><label class='gfield_label gform-field-label' for='input_7_7'>Is the owner of your company (&quot;Company A&quot;) also a company (&quot;Parent Company&quot;)?<span class=\"gfield_required\"><span class=\"gfield_required gfield_required_asterisk\">*<\/span><\/span><\/label><div class='ginput_container ginput_container_select'><select name='input_7' id='input_7_7' class='large gfield_select'    aria-required=\"true\" aria-invalid=\"false\" ><option value='' selected='selected' class='gf_placeholder'>---<\/option><option value='Yes' >Yes<\/option><option value='No' >No<\/option><\/select><\/div><\/li><li id=\"field_7_8\" class=\"gfield gfield--type-select gfield_contains_required field_sublabel_below gfield--no-description field_description_below gfield_visibility_visible\"  data-js-reload=\"field_7_8\" ><label class='gfield_label gform-field-label' for='input_7_8'>Are there any human co-owners of Company A?<span class=\"gfield_required\"><span class=\"gfield_required gfield_required_asterisk\">*<\/span><\/span><\/label><div class='ginput_container ginput_container_select'><select name='input_8' id='input_7_8' class='large gfield_select'    aria-required=\"true\" aria-invalid=\"false\" ><option value='' selected='selected' class='gf_placeholder'>---<\/option><option value='Yes' >Yes<\/option><option value='No' >No<\/option><\/select><\/div><\/li><li id=\"field_7_6\" class=\"gfield gfield--type-select gfield_contains_required field_sublabel_below gfield--no-description field_description_below gfield_visibility_visible\"  data-js-reload=\"field_7_6\" ><label class='gfield_label gform-field-label' for='input_7_6'>Do you honestly expect your company to attract angel or venture capital investors in the near future?<span class=\"gfield_required\"><span class=\"gfield_required gfield_required_asterisk\">*<\/span><\/span><\/label><div class='ginput_container ginput_container_select'><select name='input_6' id='input_7_6' class='large gfield_select'    aria-required=\"true\" aria-invalid=\"false\" ><option value='' selected='selected' class='gf_placeholder'>---<\/option><option value='Yes' >Yes<\/option><option value='No' >No<\/option><\/select><\/div><\/li><li id=\"field_7_1\" class=\"gfield gfield--type-text gfield_contains_required field_sublabel_below gfield--no-description field_description_below gfield_visibility_visible\"  data-js-reload=\"field_7_1\" ><label class='gfield_label gform-field-label' for='input_7_1'>Name<span class=\"gfield_required\"><span class=\"gfield_required gfield_required_asterisk\">*<\/span><\/span><\/label><div class='ginput_container ginput_container_text'><input name='input_1' id='input_7_1' type='text' value='' class='large'     aria-required=\"true\" aria-invalid=\"false\"   \/> <\/div><\/li><li id=\"field_7_2\" class=\"gfield gfield--type-email gfield_contains_required field_sublabel_below gfield--no-description field_description_below gfield_visibility_visible\"  data-js-reload=\"field_7_2\" 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gform-field-label' for='input_7_11'>Comments<\/label><div class='ginput_container'><input name='input_11' id='input_7_11' type='text' value='' autocomplete='new-password'\/><\/div><div class='gfield_description' id='gfield_description_7_11'>This field is for validation purposes and should be left unchanged.<\/div><\/li><\/ul><\/div>\n        <div class='gform_footer top_label'> <input type='submit' id='gform_submit_button_7' class='gform_button button' value='Submit'  onclick='if(window[\"gf_submitting_7\"]){return false;}  if( !jQuery(\"#gform_7\")[0].checkValidity || jQuery(\"#gform_7\")[0].checkValidity()){window[\"gf_submitting_7\"]=true;}  ' onkeypress='if( event.keyCode == 13 ){ if(window[\"gf_submitting_7\"]){return false;} if( !jQuery(\"#gform_7\")[0].checkValidity || jQuery(\"#gform_7\")[0].checkValidity()){window[\"gf_submitting_7\"]=true;}  jQuery(\"#gform_7\").trigger(\"submit\",[true]); }' \/> \n            <input type='hidden' class='gform_hidden' name='is_submit_7' 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You can do that with the default taxation models.<\/p>\n<p>The only reason not to take advantage of the S-Corp status may be in situations where the company&#8217;s only income is passive, as when your company&#8217;s purpose is to hold investments.<\/p>\n<p>So go ahead and create your LLC, then immediately file the IRS Form 2553 to elect S-Corp taxation status.<\/p>\n<blockquote style=\"background-image: none;\"><p>Still not sure which status to choose? Learn about the <a href=\"\/2020\/03\/new-business-llc-s-corp\/\">advantages and disadvantages<\/a> of each.<\/p><\/blockquote>\n<p>Entrepreneurs are going to save the world, and Argent Place Law wants to help. That\u2019s why we are a team of entrepreneur-lawyers to Entrepreneurs just like you. Think how great will it be to have a legal team with entrepreneurial experience on your speed dial so you can call us up and ask, \u201cI want to start a new business, should my new company be an LLC or an S-Corp ?\u201d Call Argent Place Law to find out.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\ufeff When you start your new limited liability company (LLC) and get an EIN from the IRS, you may elect to be taxed as an S-Corp. In most case you should file that election. The Form is 2553. The default way for new businesses to be taxed at the federal level is either: If you&#8230; <\/p>\n<div class=\"clear\"><\/div>\n<p><a href=\"https:\/\/www.argentplacelaw.com\/2019\/06\/elect-s-corp-tax-status-when-you-start-your-llc\/\" class=\"excerpt-read-more\">Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":6085,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[56,123,129],"tags":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.argentplacelaw.com\/wp-json\/wp\/v2\/posts\/7292"}],"collection":[{"href":"https:\/\/www.argentplacelaw.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.argentplacelaw.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.argentplacelaw.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.argentplacelaw.com\/wp-json\/wp\/v2\/comments?post=7292"}],"version-history":[{"count":1,"href":"https:\/\/www.argentplacelaw.com\/wp-json\/wp\/v2\/posts\/7292\/revisions"}],"predecessor-version":[{"id":11751,"href":"https:\/\/www.argentplacelaw.com\/wp-json\/wp\/v2\/posts\/7292\/revisions\/11751"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.argentplacelaw.com\/wp-json\/wp\/v2\/media\/6085"}],"wp:attachment":[{"href":"https:\/\/www.argentplacelaw.com\/wp-json\/wp\/v2\/media?parent=7292"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.argentplacelaw.com\/wp-json\/wp\/v2\/categories?post=7292"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.argentplacelaw.com\/wp-json\/wp\/v2\/tags?post=7292"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}