When NOT to have your LLC taxed as an S Corp | Sole Proprietor vs. S Corporation

[@tonyrodriguez2003]

Great Video. Now I know not to have my LLC taxed as an S Corporation, as I have less than 40,000 profit this year as a day trader.

[@AmberPlaatjies-m3p]

Was looking for this video and comment

[@AmberPlaatjies-m3p]

Which broker are you using

[@Hooch1514]

There is no Medicare cap. Just 6.2 soc sec that gets capped. Out of state Corp does not avoid state tax unless you live there. Your nexus is home state. The other no tax states are chosen for asset protection, not tax unless you have part or full nexus with your business activity.

[@NaviMarajCPA]

Great points Hooch!

[@googleuser6040]

You gave more information than most CPA's would

[@wildkims2008]

this video is a must watch for anyone starting an LLC. answered all the questions I have been trying to google for weeks

[@NaviMarajCPA]

Thanks for the comment and support!

[@ItstheDaveShow1]

I know this video is a couple years old. I have an accountant that recommended me doing S corp. Most of my income comes from what I think of an call passive but still confused as you go over this. I have royalties from designs I have made (print on demand) that I make money on when they sell but other companies do the selling, printing and shipping, I get a royalty. other is commissions from sales from product videos I have made. Again it is on another platform, when someone watching my video and customer buys I get a commission, like affiliate commissions and I get that too. Lots of money coming in from many sources like this.

[@kimberlyskrobol9167]

super helpful, these concepts are often so dry and abstract but you make them easy to understand, most of us LLC peeps are better at our skillset than tax law, but that's why we're here to learn! subscribed!

[@NaviMarajCPA]

Glad you found it helpful Kimberly and thanks for subscribing!

[@caseykuny2360]

I agree, this was made to be easy to understand! I am in the process of filing my LLC and this really helped me.

[@christinboettcher8385]

I started a mobile iv business a few months ago. I am completely restructured now. Im doing medical weight loss and all virtual. I have my medical director np pharmacy insurance etc. I run ads off fb and reach clients this way. I finally got a finance company to offer financing to patients. My issue is im not sure what to do about llc sole proprietor etc. The finance company is asking for business license and ein and as far as i know i have neither. I havent launched ads uet because im waiting for finance as i feel that will be a HUGE hit and will allow the business to really grow.

[@comingtofull-ageinchrist6736]

The way I had it broke down to me is as a LLC self employed person, you are considered a share holder, and you do not get a deduction for the money you may distribute to yourself. the 15.3 tax is the 7.65% that you pay for the money you distribute to yourself and the LLC is taxed 7.65%. When it makes sense to switch to an S Corp is when you LLC is making 40K and up to 200K and 300K, the deductions you get as an S Corp pay off. As an S Corp I qualify for a QBI deduction which is 20% deduction on business income I don't pay myself. say the taxable income of the S Corp is 100K and I pay myself a minimum of 30%. The remainder of 70K times the 20% is 14K that I just saved myself for being an S Corp rather than an LLC, so now instead of paying Fed and State on 70K, I'm paying Fed and State tax on 56K. and instead of paying 15.3% on Fica, Fed and State taxes on my 30K I payed myself, I'm paying 7.65%, and my business is not paying any taxes on the 30K I paid myself plus the remainder of the 100k of taxable income from my business not only get to deduct the 30K bringing the taxable net worth of the S Corp to 70K minus the 20% for QBI. Karlton Dennis does a really great job of covering all of the pros and cons of both the LLC and the S Corp and C Corp and when it makes sense to become an S Corp and leave off the LLC business. Anyway, for whoever wants to hear.

[@phynleigh4105]

I am starting a business that can scale to 6 figure retained earnings, but I am starting from zero since filing my LLC (partnership with both being employees). I need to do payroll to compensate the work done on the business proportionately, but cannot be certain the profit of the business. I am thinking to just go ahead and do the S corp and I am going to do the payroll myself since it will be task related and I don't want to pay 125$ a month for a firm to do my bookkeeping just for the payroll. Thank goodness I live in Texas and don't have to deal with state income tax. This was very informative as I have been researching this for a while. Thank you!

[@Munchy1]

Another factor that makes it extremely difficult to determine the advantage of an S-corp in the QBI deduction. Without the S-Corp, all profits could be eligible for the 20% QBI deduction, but the S-corporation will force you to take some of those profits as wages. So you actually pay a higher tax rate on at least some of your income than you would without the S-corp.

[@shaynadavidovhansonrealtor]

What’s a QBI deduction?

[@helprehouseourvets6919]

@@shaynadavidovhansonrealtorThe *qualified business income* deduction (QBI) is a tax deduction that allows eligible self-employed and small-business owners to deduct (up to 20%) of their qualified business income on their taxes. In general, total taxable income in 2024 (must be under) *$182k* for single filers or ($364,200) for *joint* filers to qualify.

[@gideon7177]

Appreciate the S Corp tip. Im in NYC and couldnt figure out why my CPA told me not to bother with turning my LLC into an S Corp

[@AngelaThompson-i2p]

Mr. Maraj I am a Realtor. 3 parts here: 1) The last 5 years I have been taxed to death with an LLC. My accountant NEVER told me about an S-Corp. I paid between 14,000-25,000 each year to the IRS. Mostly the latter. Ughhh 2) I have just moved to another state and will be doing Real Estate as well. I will have to build up my clientele all over again so can I set up an LLC and change and file an S-Corp in a year when I have profits over $40,000? Can you change your filing status from the original? LLC to add S-Corp a subsequent year or vise-versa depending on profits? Toggle between each year-to-year depending on profits? 3) I have been a housewife most of my life so I have NOT paid into SS much except for the last 5 years. Does it make MORE SENSE to continue to be only an LLC without an S-Corp to to ensure my SS for later on in life? I am not married and was not married for 10 years.

[@Shahablo]

just the part about the 137k w2 cap saved my butt with regards to starting an S-corp. Thank you!

[@NaviMarajCPA]

Glad you got value out of the video! I explain in detail the impact of having a W-2 job and a small business in this video: kzbin.info/www/bejne/Z5zYl56apNN1e7c

[@itsagod]

much wisdom, I’m a young entrepreneur and I notice the things many people aren’t aware of as I navigate through the business world and how I could have messed this up or overdone that. you said some terms business owners likely overlook. There’s more to just having a business and doing what you “think” is right.. we need the definitions and differences/knowledge between simple words. As entrepreneurs we have to look for this knowledge when not taught! Great video!

[@Mav0585]

What about my wife, who’s a CRNA. She has no overhead except the administration of doing her taxes and legal needs. She makes about $400,000 per year, right now is a Sole Proprietor/LLC. Not an S-Corp, but she’s thinking about making that switch.

[@patrickm6012]

If you are going to rent a property, let’s say your primary residence, would it be wise to put in an LLC for personal liability reasons.

[@MRSHO-g2s]

What tax election should I make for a single owner LLC created to sell on Amazon? Thanks for the free knowledge.

[@dominiquetaboso4591]

I’m glad i came across your video before fax my SCorp form. I currently own property and rent them

[@NaviMarajCPA]

I’m glad too Dominique! Congrats on avoiding a mess.

[@Rew123]

Thanks man. Read about this concept on White Coat Investor (that mixing a well-paying W2 job with an S-corp side hustle may actually cost you more) and was looking for confirmation. Appreciate it.

[@NaviMarajCPA]

You're welcome....I'm pretty sure I read the same article/post on White Coat Investor. This topic is not discussed as much as it should be.

[@Pickleballadventures]

Question for you, I suspect the first year will be less than 40K since we started in August 2024. In the future, the business will be over 40k. Should we have the LLC taxed as a sole proprietor or S corporation? Our W2 income combined may be over 137K this year. My wife left her job in July to start her own business.

[@marialdiaz727]

Love all this content! We spoke once and soon as I get my RE business up over 40K I will be in touch. Thanks for sharing all this knowledge!

[@NaviMarajCPA]

Thanks Maria - glad you're enjoying it!

[@ICUAdvantage]

Great video and a lot of good information. Thanks for sharing! Quick question. Would AdSense paid on KZbin videos be classified as passive with the IRS?

[@NaviMarajCPA]

Great question! Unfortunately not, Ad revenue is active income which is subject to self employment taxes.

[@oleglistunov1294]

This is cool, man. Keep doing what you’re doing!!!

[@cobylyons4439]

I want to pay into social security, but it doesn't seem that I'm being that with just our LLC (holdings of rental properties and I'm a co-owner with my wife). Our tax agent suggested paying me a salary. I don't seem to be earning it

[@cobylyons4439]

My wife has a day job/career and I'm the domestic parent while in grad school

[@NaviMarajCPA]

Have you looked into the spousal IRA? You can contribute money into an IRA even if you don’t have earned income. Probably better than contributing to SS and Medicare. Also, there is (currently) a spousal benefit for SS as well. Look into it….you’ll be able to collect a small portion.

[@MikeTFresh]

This video was VERY helpful! Thanks so much. Everything you mentioned was exactly what I was looking for in my circumstance. I make a fairly decent amount of money at my day job but also have made good money this past year in e-commerce. I've been torn because everyone online is mentioning that an s-corp is the way to go. This confirms a lot of my worries. Thanks again for your time.

[@pjrealty7555]

i formed my LLC in 2015 and was told by an accountant to set up a sub chapter S. however i dont have enough time to file the 2553 since its Jan 2!

[@NaviMarajCPA]

Hi PJ...ask your accountant if he/she can help you file it late. It can be done but some accountants don’t know how or don’t want to file the paperwork for a late S Corp election.

[@ginabeebe7060]

You spoke about passive and active income....trying to understand which one a Realtor with no rental properties, just strictly sales would be? Because the state tax thing confused me and Im trying to do some more research.

[@NaviMarajCPA]

Hi Gina…your commissions earned would fall under the “active” or “earned” income category.

[@ginabeebe7060]

Thank you for that Clarification. I live in the state of VA and it says that every pass through entity (Which S Corp is) that does business in VA or receives income from VA sources must file aan annual VA Income tax return. So does that fall under one of the reasons you said you should NOT do an S-corp?

[@KevinMacKinnon-k3w]

Very well presented. Perfect level of information without being repetitive.

[@jaysonshawnpaul5166]

Point number 4 is huge! That should be number 1 in my opinion. Super helpful. I think I will wait to do the S-corp status, because it sounds like a huge headache.

[@jbaba1931]

Watched all your videos today and subscribed, just wondering on the high w2 and s-corp, my reasoning for s-corp is to get the sep ira which offsets some tax etc… not sure if this strategy makes sense. I make somewhat the same on net business and my w2 work

[@NaviMarajCPA]

There are a lot of rules about this and so you should discuss it with someone. But just so you know, you can establish a SEP IRA and even a solo 401(k) as a sole proprietor.

[@RoamwithRasha]

So if a business is just starting out, you wouldn't suggest an s-corp right? also, is it easy to switch to it later if need be?

[@NaviMarajCPA]

That's right. I don't recommend S Corps unless the business earns over $40k minimum in profit each year. Yes, it is easy to elect S Corp status in a future year.

[@eighty_ocho]

@@NaviMarajCPAi have an LLC which I make $83K per month… since 4/23. Should I pursue an s corp status?

[@kimberlymcdonald8653]

​@@eighty_ochoif you are making that much monthly I hope you have a good accountant walking you through everything, if not get one asap.

[@RikoRey92]

​@@eighty_ochoare you paying self employment tax?

[@emmanuelfleurine121]

thank you for those great advises

[@NaviMarajCPA]

You're welcome Emmanuel.

[@RealmsMedia]

Finally. After a dozen articles and countless videos one that finally makes it all make sense.

[@joeyvalentine7117]

What exactly is the objective rubrick to determine if income is passive or not?

[@StainedGlassDIY]

This is gold! Thanks for the knowledge!!

[@NaviMarajCPA]

Thanks so much for the comment @Stained Glass DIY! Glad you found it helpful!

[@MrSannyShaikh]

Thanks for the information. Very helpful. What happens if instead of me having a W2 income, my wife has a W2 income that exceeds 137K?

[@nitaspastries]

So many video’s out here. I’m here trying to start my home bakery. I want to register my business and my CPA is asking me which entity I want. 1. I want my personal and business to be very different. But I heard S corp you will have to file your taxes with your personal. So please help me please 😢😢😢😢

[@NaviMarajCPA]

Hey Annyta...no offense to your CPA but they shouldn't be asking you what entity you want. They should, at a bare minimum, inform you of the differences so that you can make an educated decision. If you go to my website and schedule time on my calendar we can discuss this if you wish. The 1120S return (tax return for an S Corporation) is a separate tax return from your Form 1040 which is your individual tax return. The profits or losses from the 1120S will flow to your individual 1040. Hope this helps a little.

[@nitaspastries]

@@NaviMarajCPA yes it did help a lot. I watched your videos on various entity and decided to go with an S corp. thank you so much.

[@abreashamsid-deen9524]

You are a saint!! I was filling out the Form 2553 to elect S corp status and came across your video. I now realize that it makes absolutely no sense for me to elect.... that and the simple fact that the election is not recognized in Texas anyways. Thanks for this video!!

[@yoddy0]

I don't know where you got that information from. Everything that I have researched suggests that Texas does recognize LLC's that elect to be taxed as a S-Corp. Its even an option when filing to become an LLC with the secretary of state.

[@abreashamsid-deen9524]

@@yoddy0 You’re absolutely correct. To clarify, I meant Texas does not recognize the tax benefits associated with the S Corp election. You can definitely elect it however.

[@yoddy0]

@@abreashamsid-deen9524 Oh thank you for the clarification. I have been learning something new everyday after looking into opening a small business myself. Best of luck in your business venture.

[@abreashamsid-deen9524]

@@yoddy0 Thanks! Best of luck on your ventures!

[@laurawilliams7899]

What if your spouse has a W2 but you’d LLC is single member, so your spouse is not included on the LLC?

[@cynthiabotsko2449]

Very informative! Much clearer than many other articles & videos I've seen. Thank you!

[@sayilu]

thank you, I found your video is more deep dive than most of the other videos.

[@NaviMarajCPA]

Thanks! The deeper dive is where all the good stuff is.

[@Lasagna_is_a_sandwhich]

I am so happy to have found your videos!

[@NaviMarajCPA]

The feeling is mutual Jennifer!

[@ninqistratton3418]

Do you have a video about the difference/benefits of creating our business as a INC S-Corp vs a LLC with S-Election?

[@NaviMarajCPA]

No, but there would not be any difference from a tax perspective for the majority of businesses - only legal differences.

[@Loretta-uc1vh]

Great explanation ... especially re: passive income.

[@ionsochirca9244]

I thought if you're an LLC you're taxed payroll tax regardless of whether you pay yourself a salary or a dividend. So if I have lots of rentals why not wanna be taxed as an S corp that way you can only pay yourself dividends and pay just personal income tax?

[@NaviMarajCPA]

Ion…watch this video where I expand on the reason rentals should not be taxed as an S Corp: kzbin.info/www/bejne/oZiVpWWPYt2Xo8U

[@plum_loco]

A visual would be very helpful.

[@creditjourney429]

How often can I do an owner draw? Is there a recommended owner draw amount or number of draws?

[@NaviMarajCPA]

Hey @Marisol the term "owner draw" is usually associated with a business taxed as a sole proprietorship. If that is the case, then you can do draw's as much as you want. An owner draw is how a sole proprietor, gets paid. You can watch my video about "How to pay yourself as an LLC" and get more answers.

[@floraeasterfjnotaryandlive2767]

Thank you Navi you are very helpful and you explain everything.

[@NaviMarajCPA]

Thank you Flora! Glad I can help you understand these concepts.

[@467inc]

I started out as a c corp which was a bad idea. I'm an owner operator with only one truck. Trying to find videos on switching from c corp to LLC. Can't find any

[@nadineschleske3481]

Wow, I have tried to understand the true meaning of active and passive income for years and this is the first time that it made sense.

[@septemberdixon1612]

Hello and Good Morning. My name is September Dixon, I am interested in creating a trust and need to know how. Also if I should put it under an s-Corp designation if the properties and entities are in numerous states.

[@thesosofia]

Can you open an LLC and originally choose to be taxed as an LLC, but later, when you start making at least 40k profit, can you change it and choose that you want to be taxed as an s-corp?

[@NaviMarajCPA]

Yup! That is what makes the LLC so great. Just to make a small correction to your question though...."choose to be taxed as an LLC". An LLC is not a tax classification. By default, an LLC will be taxed as a "sole proprietorship" or a "partnership".

[@MrDro1128]

How would you stack a Trust into a S corp into a LLC?

[@guythomas9977]

How does the QBI Deduction apply to all this? Disregarded entity vs LLC S-Corp

[@NaviMarajCPA]

Great question - one day, I'll make a video on this topic but, in most cases, you're still better off with the S Corp. Just in case you're wondering, sole props, partnerships and S Corps all qualify for the QBI deduction but you may be hinting at a more technical concept that I can't touch on here via the comments.

[@NaviMarajCPA]

Hey Guy!...this week's video being released on 08/27/21 @ 5PM EST will cover the QBI Deduction.

[@thelifeandtimesofyoboislim8967]

What about the State of GA.? As far as having a LLC taxed as a S Corp.

[@NaviMarajCPA]

Usually not a problem in Georgia but this is not specific tax advice for your individual situation. This video covers the topic in greater depth: kzbin.info/www/bejne/nGmcqoCted-tirc

[@scottgier5709]

Thank you for this information. I earn 100k as employee and 100k in my LLC. This suggests just stay under LLC for self employment tax reporting

[@NaviMarajCPA]

Hi @Scott Gier. This video may help you further: kzbin.info/www/bejne/Z5zYl56apNN1e7c

[@michellekross1292]

But you can keep your structure as a LLC, but file as an s-corp right?

[@matthewnovik4050]

at least with an s corp you get a w2 for future social security benefits, no?

[@NaviMarajCPA]

Sole proprietorships pay self employment tax (social security and Medicare) on the profit of their business which counts towards their social security benefits in the future.

[@diamondturner6890]

Hey I just started a Airbnb business and I'm not sure how to file we have a 2 member llc

[@NaviMarajCPA]

Who is the 2nd member? A spouse or business partner? What state is your Airbnb in? What state do you reside in?

[@diamondturner6890]

@@NaviMarajCPA we aren't married yet so business partner I live and host in tx

[@NaviMarajCPA]

@@diamondturner6890 you’ll be taxed as a partnership using Form 1065. It is due March 15th, not April 15th.

[@diamondturner6890]

@@NaviMarajCPA okay great do I need to start a payroll as well ?

[@NaviMarajCPA]

@@diamondturner6890 no, your Airbnb business is considered passive income. Do not have the LLC taxed as an S corporation and do not take payroll.

[@aclegacy7]

Navi I do have a Sole Proprietor on janitorial services, they want to form a LLC of course 1 member they need to file a 1040 still next year? Or do they need to file LLC in State and choosing to be tax as S corp what is more convenient for her, she past the $40,000.00 last year and this year she's on 80 thousand. I really appreciated your response Great videos bother way.

[@NaviMarajCPA]

A single member LLC (SMLLC) by default is taxed as a sole proprietorship. So if you form a SMLLC the business will file a Schedule C which is part of the 1040. If you want to have the SMLLC taxed as an S Corporation, then you need to file Form 2553 with the IRS to elect S Corp tax status for the LLC. In general, I recommend that businesses with $40,000 or greater in profit, make the S Corp election.

[@jaleogibbs9347]

Towards the end of the video you brought up the example about passive income and how passive income is not subject to self-employment taxes. You mentioned that individuals who own rental properties should not set up an S-Corp because that makes them subject to self-employment taxes. I thought one of the main reasons why businesses elect to be a S-Corp was to avoid self-employment taxes? Why would a S-Corp that receives passive income be subject to self-employment taxes? Seems contradicting to me.

[@NaviMarajCPA]

Hi Jaleo….watch this video and it may clear things up for you. If after watching, you still have this question, let me know. Here is the link: kzbin.info/www/bejne/babcZaymds6Zrqc

[@phillipperez3358]

What a great video! Thank uou Sir. I'm ao confused lol. I have a couple of small rentals. Total rent a year is around $37,000. I pay the "triple net"(long story) 😂. Last year I paid a crazy amount in taxes. After triple net and repairs that $37,000 went down to $22,000. And i still pay taxes. Its pretty frustrating

[@randomiscam8453]

Well explained and super helpful Navi! You answered questions I had concerns about.

[@anoopmeet1]

What about Social Security cap in case of the Joint return? If the Household income goes more than 137K?

[@NaviMarajCPA]

The wage base is per individual...you and your spouse both have your own individual wage base even if you file a joint tax return.

[@anoopmeet1]

@@NaviMarajCPA Thanks a lot for the response. Really appreciate your help.

[@junior6303]

Is there a deadline when I switch my LLC to a S-corp for this year's income 2023?

[@ponleusoreyaa]

A very quick question sir, for a start up business that hadn’t made a lot of money yet, should one go in as a sole proprietor first? Would it make sense to establish a single member LLC or even an S Corp or C Corp? Could you direct me to another video, if you’ve made it, which elaborates more on these topics?

[@NaviMarajCPA]

Did you see this video? Sole Proprietor vs. LLC vs. S Corporation vs. C Corporation | Legal & Tax Differences….watch that one and then one entitled When does an S Corp make financial sense.

[@jdcolo]

I’m forming an LLC to protect my personal assets. Eventually, I will create a pass through corporation. However, I rec’ve $87 K from the sell of a home but, gave my (biz) EIN as the re’ver of those funds. Most of the proceeds of this money was used to equip my business and pay a few legal expenses. So, here is the question. Should the LLC be where this money goes meaning (I had less than $10K that I used for personal reasons. My main income comes from Soc Security and a small pension about $13K/k combined for the year. What type of pass thur should I use? But, my thought is, until my net profit is above $50k should I be concerned with forming a pass thur.

[@liaoweien]

Thanks for the awesome video. If I have a S corp and have profit, Can the single shareowner take loan out of S corp and pay the S corp with reasonable interest each year? By doing that, the shareowner does not need to pay tax on those profit sitting in S corp. Thanks

[@NaviMarajCPA]

The loan would not be considered a deductible business expense so the S Corp would still be profitable and you would have to pay federal and state (if applicable) income taxes on the profits.

[@siobhansyt]

So if you’re in NYC, how do we save on our taxes if SCorp isn’t recognized?

[@NaviMarajCPA]

May not be able to save on social security and Medicare taxes if you’re in NYC. I suggest Implementing all other possible strategies I discuss on my channel. Consider moving out of NYC (if possible).

[@dmarieconsultingllc6112]

Thanks for the information. I watched three videos prior to this one. I understood it better after watching your video, especially the difference pertaining to legal structure and income tax structure.

[@NaviMarajCPA]

Thanks for the feedback! Glad you are learning and the video was able to clear some things up for you.

[@staceystephens4754]

Thanks ! You are a great accountant - I like seeing your type ; it gives me hope for the profession.

[@NaviMarajCPA]

Thanks Stacey! Does that mean you're considering being an accountant?

[@staceystephens4754]

@@NaviMarajCPA I am a CPA & CMA- been an accountant in industry for 12 years - just started at a small firm to try to share my years of experience ( was in sales before accounting ) we will see how it works. I realize my ethical standards are more inline with facts, circumstances, and intent so we shall see how this chapter of advisory services works out🤷‍♀️

[@NaviMarajCPA]

I know what you mean @Stacey...I worked in audit for one of the Big 4 prior to what I do now.

[@staceystephens4754]

I have had a hard time getting my foot in the door bc I don’t have the Big Four audit experience ... I am not gonna lie.. it is very frustrating for me but I shall keep working hard, learning & one day I will hopefully be where I would like to be with my career. It has been hard to not give up. Some times I feel like the line from the Blade movie - some mf’s always trying to ice skate uphill. Plus, in industry, I have had ethical struggles where my values don’t align with executive level management. So hopefully I can find a work home one day... which is why I always like to give people kudos for not being wishy washy with tax laws & suggesting a person can play the “audit lottery” 😡

[@andraywilliams8278]

I'm starting a junk removal business but I don't want to be double tax! What should I do?

[@andraywilliams8278]

Illinois

[@NaviMarajCPA]

Hi Andray - I can’t give specific advice here but, in general, don’t form a C corporation and you’ll avoid double taxation.

[@ottolatimer9175]

How to convert S Corp LLC to sole proproetorship?

[@Grassology-vs1hn]

Hi we make under 20k as a lawn care business and 90k at our FT day job. The lawn care business is a llc should we switch to SCorp ?

[@NaviMarajCPA]

Based on that (limited) fact pattern, I don’t think you should elect S corp status.

[@Grassology-vs1hn]

@@NaviMarajCPA , if we make a order to get a trailer in 2021 but the order doesn’t come till 2022 do we claim it on this years tax return?

[@lechugaevencio6718]

Thanks

[@NaviMarajCPA]

You’re welcome!

[@bethanybarquer6545]

What do you do if you made an error and set up the scorp election and changed your mind?

[@CodyHill.Mastery]

I created an S-Corp in WA. However, it's just my wife and I.. Do I need to dissolve it? Then create another LLC?

[@NaviMarajCPA]

Not sure you provided enough information to provide an answer to your question. Feel free to add more info and I'll try to get back with you.

[@CodyHill.Mastery]

@@NaviMarajCPA Thank you! I think I figured it out. Basically, I didn't know if I could rebrand an LLC, or if I had to create another one. I just created another LLC, and dissolving the other. Thank you!

[@jalenawilson8697]

Informative. What is the time frame we have as a new business to decide if we want to be taxed as an s corp or not? Is election something we can change from year to year or once elected we can't adjust?

[@some1luvsu84]

Thank you for the very informative video. I know you mentioned NYC taking extra tax on S - corp but how about NYS?

[@NaviMarajCPA]

You’re welcome. Your question has an answer that changes depends on different factors that I can’t get into here. In general, know that New York requires S corporations to file a New York S-election form to be considered an S corporation to New York. Additionally, New York S corporations are required to pay the corporate franchise tax based on New York receipts (sales).

[@sharonboozer4127]

What about rental arbitrage? Would that be considered passive or active income?

[@NaviMarajCPA]

Passive....rental properties are typically always passive unless you are performing services similar to a hotel such as nightly turndown service, serving breakfast, cleaning the rooms each day, etc.

[@jenniferzorio1873]

Great information! Thank you

[@NaviMarajCPA]

You’re welcome Jennifer!

[@surname037]

If my business is an S Corp, what percentage split should I use to pay myself? For example, I have heard of people using a 50/50 split or a 60% W2 and 40% dividend

[@NaviMarajCPA]

Each business is different so I cannot provide an answer. Sorry I couldn’t be of further help for this particular question.

[@jameshill1954]

Thank you, Navi, very informative. Subscribed

[@NaviMarajCPA]

You’re welcome. Thanks for subscribing to the channel.

[@theprintgoddess]

Thanks for answering the question about high W-2 income. If W-2 income is at 110K-120k but profits are well under $40K should you form an s-corp?

[@luckyjordan8139]

No, just do LLC taxed as sole prop. LLC reduces your exposure to law suits, but the sole prop tax filing won’t cost much. If you did an s-corp the accountant is going to charge 2500/year

[@lamonteb5903]

Thanks for the videos. Definitely learned alot.

[@NaviMarajCPA]

You’re welcome LaMonte. Glad you are learning - that’s what the channel is all about!

[@douglaswilson9969]

@7:08 you mentioned (under the scenario you gave) "you will lose money if you elect the S corp status because it will pay for the employer portion of Social Security and Medicare taxes." If you maxed out the wage base from your regular job (ex earned 150K that year) and then your S Corp side hustle wage is 50K, will you have to pay the self employment tax on that 50K as part of the individual return? Or will there be a refund from the IRS for any excess withholdings to self employment tax for the employee/member?

[@NaviMarajCPA]

Hey Douglas! Watch this video where I go into that topic in depth. It’s entitled “Small Business and W-2 Job | Does LLC or S Corporation still make sense?” Here is the link: kzbin.info/www/bejne/Z5zYl56apNN1e7c

[@jcman240]

40k profit = 20k w2/dstbn, so 3000 is the benefit, what are the accounting/admin costs?

[@NaviMarajCPA]

I think you would benefit from watching this video if you haven't already. It should address your question: kzbin.info/www/bejne/h3e8d3qcfbSoras

[@stephenaichner1091]

Very helpful info! Great explanations. Thank you!

[@NaviMarajCPA]

You're welcome, Stephen. Glad you found the explanations helpful.

[@quincybaker4615]

Is short term rental income earned through Airbnb subject to self emolument taxes?

[@heatherlee8956]

great Video thanks!

[@NaviMarajCPA]

Glad you liked it, Heather!

[@Healyouradrenalfatigue]

Thank you for the great info!

[@Philadelphia19147]

Great channel. Thank you for your time

[@NaviMarajCPA]

Thanks for the feedback John!

[@khalilcofilms]

I own(still paying the mortgage) a house, and in September I will have had it for 2 years. Should I A. Keep it as a long-term investment -or- B. Move the ownership of it to my Photo/Vidoe business and file as an S-Corp. In both scenarios, I plan on moving and turning it into an Airbnb.

[@NaviMarajCPA]

I think you’re confusing some things based on your question. If you turn your home into an Airbnb, you can form an LLC for it but you wouldn’t want to have that LLC taxed as an S corporation. Your operational business (photo/video) can have its own separate LLC and elect to be taxed as an S Corp if it makes financial sense.

[@khalilcofilms]

@@NaviMarajCPA Thanks Navi!

[@jaimehaiti9479]

Just starting out this year. Do I need to get an EIN as a Sole Proprietor or my SS is good enough ? Do I also need to file an annual report in FL for $150 every year also?

[@1Corinthians15.1-4]

An EIN is not required for a sole proprietor since you're not creating a separate entity (corp, llc, etc). What annual report are you referring to in Florida? If it's about filing a separate entity's Articles of Incorporation or Articles of Organization, then that's not needed for a Sole Proprietorship. It doesn't require any filing with any state because a sole proprietor is solely responsible for his/her liabilities and the taxes you pay are all together (business and personal). My opinion is you should never be operating as a sole proprietor in any business. You would be exposed to lawsuits and business debts. It's a terrible idea if your business is providing a serious service or product to a large clientele. Talk to an attorney about that.

[@NaviMarajCPA]

Thanks for the assist jostube06! Jaime - just in case you meant "LLC taxed as a sole proprietorship" then I would recommend obtaining and EIN for it. And yes, once you form that LLC, each year thereafter you'll have to file the annual report or you will be hit with a $400 late fee and then risk involuntary dissolution.

[@diamondnova7598]

What if it’s a holding or management company would it make sense to be taxed as an scorp or become one?

[@marketbuy]

Hi Navi. I am an LLC SCorp as of 2021. I purchased a 2021 TurboTax Home and Business edition. While working on my Schedule C in TurboTax, I had thought that upon completion of my Schedule C, I can simply click on 1120S and I would complete my 1120S form with a click of a button in TurboTax. This is NOT the case! Little did I know that I have to MANUALLY enter everything onto 1120S FORM SEPARATELY! Doh! Soooo, when I electronically file my 1040 tax filing via TurboTax , does Schedule C get submitted electronically as well? What should I do with the Schedule C from my 2021 TurboTax Home and Business that I completed? Delete it? Send it electronically along with all my forms and 1040? TIA

[@NaviMarajCPA]

If you have a business taxed as an S corporation, then all that activity will go on 1120s. There is a separate program from TurboTax for 1120s returns. You’ll want to get rid of the Schedule C.

[@marketbuy]

@@NaviMarajCPA Thank you for your reply. Yes, I ended up buying the TurboTax Business edition from Costco online that does 1120S. I haven’t started it yet but I’m sure the calculations will be the same as Schedule C. This is one of the idiosyncrasies of being an SCorp if we have to buy a different version of TurboTax to do 1120S. Live and learn. I do have a CPA question for you if I may ask. 2021, I (employer) contributed $26000 to my self directed 401K from my business checking account to Fidelity. I coded this in QB as Self Directed 401K contribution EXPENSE So, on 1120S, I apply this $26,000 amount on line 8 (salaries and wages). Why line 8 instead of line 17 or 18? Because according to the 1120S instructions on Line 17 (second paragraph), it stated “If the corporation contributes to an individual retirement arrangement (IRA) for employees, include the contribution in salaries and wages on page 1, line 8, or 1125-A, line 3, and not on line 17. I thought ask this question to see if you would agree. If I, the employer, contributed $26,000 to my self directed 401K, it should be treated as an expense. To record the expense on 1120S, then it should be on Line 8, salaries and wages. Agree or disagree? OR, do you believe that the $26,000 contribution should be an owner withdrawal from QB instead of an expense? The reason why I made it as an expense is to lower my tax basis (net income). Oh, My officer compensation is $48K on line 7. What do you think? My next question is how to code this $26,000 on W2 form? Would it be $26,000 on line 14, OTHER and check off “Retirement Plan” in Box 13? If not, how would you record $26,000 for my self directed 401K? This is my first year doing SCorp for 2021. I’m learning day by day doing taxes while also running my biz. TIA!

[@Kwame2012]

Thanks for the informative video. Question: I have a full time job, and I trade stocks (day trading). What’s the best entity to form? Thanks in advance.

[@lauramccann18]

What happen if I'm foreign and wanna open a LLC? Should I taxed as S-corp or C-corp?

[@thecollectiblecollectabill2298]

hypothetically: if i was to start a crypto-mining business(with multiple different ideas for more businesses to come later) what kind of LLC would you suggest, considering it will take over 2 years to break even and i'd mostly like to learn how to start/run a business and have the payment i've put down on everything deducted as business expenses to make up for paying out of pocket?

[@NaviMarajCPA]

Thanks for the question...I can’t give specific advice to you unless you were a client and I don’t know enough about crypto-mining to leave any general guidance. Sorry I couldn’t be of more help.

[@gutlarut]

Hello Navi. I see you are licensed in Florida. Where are you located? I know that accountants can take clients all over but I’m asking because I am in Florida and you have very informative videos. A little more informative than my accountant it seems.

[@TustinS]

Great video in a concise format without a lot of fluff!

[@NaviMarajCPA]

Thanks @Tujaze. Appreciate the feedback.