No. of Recommendations: 6
Sorry about that. I hit the wrong button.

I'd believe you'll usually pay more taxes... Once at the corporate level, once at the individual level.

Let's use an extremely simple example and you must remember that I have stated multiple times that I don't want the money for my personal use. I want to leave it in the business to roll over and keep using.

Let's say I have a business with 100K in net income and it has 50K in expenses. Here is how they would look:

C Corp LLC, S corp, GP, LP, Sole Proprietership
100K income 100K income
50K in expense 50K in expenses
50K in pre-tax net income 50k in pre-tax net income
7.5K in taxes due (15% corp rate) 14K in taxes due (28% my rate)
42.5K in after tax income 36K in after tax income

The simple differance in how I choose to report my business structure has increased the worth of my business by 6.5K!! And this example doesn't include any self-employment taxes or state or local taxes. Just federal taxes. Since I'm not issuing dividends to myself I don't have to pay taxes on that part of the leftover income. You only pay taxes on that part if you issue dividends, and I'm choosing to set up the corporation as a non-dividend paying entity. On top of that if I set up another corporation correctly, and this one also, I can pay dividends to that second corporation and still not have to pay much in taxes (compared to individual rates). Imagine how this 6.5K can roll over from year to year. (Eventually you do have to pay taxes on your Retained Earnings though)

See what I mean? Now of course there is the bad side that I can't get the money if I need it. But what about paying myself a bonus? Or using the corporation's income to pay for my medical expenses, car, food, housing, etc, and reduce my taxes even further? And leave me more money to personally spend on fun stuff.

From what I can tell there is a lot of fun stuff you can do with a C corp that you can't do with other business formats.

Fool on!!
Matt
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