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As a sole proprietor, all your profits are subject to self-employment tax. By forming your LLC with an S Corp election, you could change that. Get started in just 10 minutes.
A Limited Liability Company (LLC) is one of the most popular and versatile of business structures. Great for smaller organizations, LLCs are legal entities formed at the state level. They can have 1 or multiple owners.
It’s all the benefits of forming an LLC with the added tax perks of an S Corp election. In short, it lets you avoid double taxation of your personal and business income. When you form your LLC + S Corp with Block Advisors, we first help you create an LLC, then file the S Corp election.
Use the calculator below to see if an S Corp election could help you save on your self-employment taxes.
A C Corp is a business structure for companies that potentially plan to go public one day, since unlimited shareholders are allowed.
A nonprofit is a special type of business structure that exists to provide certain benefits to organizations whose main goal is service to the public. That includes community groups, churches, and certain charitable organizations.
Whether you’re already in business or still in the planning phase, the right structure could offer protection or potentially save you money on your taxes. Answer six key questions to help you find your fit.
When you register with Block Advisors, your documents are prepared and filed with the state quickly — usually within 1 day for express orders.
We’ll help you form your business with confidence, ensuring the correct forms are submitted, saving you time and money, with 100% satisfaction guaranteed.
As a sole proprietor, all your profits are subject to self-employment tax. By forming your LLC with an S Corp election, you could potentially save thousands in taxes.
Marie Soukup, Alpine Point Collective, Port St. Lucie, Florida
Did you know you could potentially save on taxes by making an S Corp election? That means forming your business could help put money towards your bottom line during tax time.
Let’s say you own a real estate business that makes around $50,000 in profit a year. If you convert that business to an S Corporation, you can use the money saved to create extra marketing materials!
Business entities come with a variety of tax benefits. Depending on your business, you could save thousands in self-employment taxes by taking the S Corporation election. There are several steps involved. To be treated as an S Corp, after forming a corporation or LLC, the shareholders must make an election with the IRS. In addition, you will need to pay yourself a reasonable salary as a W2 employee and set up payroll and withholding. If your business is profitable, your payroll taxes and income tax from this salary may be offset by the savings you achieve on the self-employment tax. Important: for existing entities, the election must generally be made by March 15th of the year the election is to be effective.
In addition, a business generally can deduct the expenses directly related to its business activity — think advertising expenses, mileage, or professional services like what Block Advisors provides. Business credits for things like renewable energy, employee retirement plan, or health insurance may also be available depending on your circumstances. These credits would reduce a tax bill dollar for dollar.
The decision to form a business entity and take an S Corp election is an important one that includes many additional considerations. For example, as the owner of a business, you also need to ensure your business financials are maintained and updated (if you’re not already) and stay on top of annual business filing and other requirements depending on your state and industry. You may want to seek the advice of an attorney to evaluate these considerations. Our products, services, and advice are not a substitute for an attorney, and we do not provide legal advice or perform services performed by an attorney.
Here’s a great article detailing potential incorporation tax benefits for small businesses.
How you choose a business structure depends on a lot of things. Each structure comes with its own specific rules, requirements, and considerations. The most common types of businesses are:
Read on to learn more detail about different business structures.
Entity formation pricing can vary based on the requirements of the state in which you are registering your business. At Block Advisors, entity formation including EIN application prep generally starts at $149 (Standard) and ranges to $299 (Premium), plus state filing fees. Some states may require entity formation add-ons such as Initial Report for $55 plus state filing fees or publication for $200 plus publishing fees.
Other services include S Corp election for $99, 501(c)(3) application for $495 plus filing fees, Swyft Filings’ Registered Agent Service for $199 annually, or Swyft Filings’ ComplianceGuard service for $149 annually after 14-day free trial.
An EIN is an employer identification number and is needed in certain situations. For example, partnerships and corporations are required to have an EIN. Sole proprietorships and LLCs that have employees, pay excise tax, or contribute to a retirement plan also need an EIN. EINs are included with all of our packages.
An S Corp is a tax election for a small business corporation or LLC that allows the company to pass its income, loss, deductions, and credits through to its owners. The company itself is not subject to tax. And that income is subject to the shareholder’s individual tax bracket, which may be lower than self-employment tax.
To take an S Corp election, you’ll need your original business filing documents (either as an LLC or corporation) and an employee identification number (EIN). For an LLC, you will need to have “checked the box” to be taxed as a corporation. You will then file Form 2553, Election by a Small Business Corporation, with the IRS. If you select our S Corp product, we’ll take care of that for you.
While an S Corp election can help reduce your tax liability, there are a few extra steps you’ll need to do as part of your business operations. One of the biggest is making sure you’re drawing a reasonable salary and filing the necessary quarterly payroll and tax forms. You’ll also need to ensure your business financials are maintained and updated, as well as annual business filing requirements depending on your state and industry.
An LLC (or limited liability company) is popular among business owners because of the versatility that often comes with the LLC business structure. LLC owners typically have less formalities imposed on their business than other entity structures. If the LLC does not make the S Corp election, default tax rules mean LLC members must pay self-employment tax. If the LLC makes the S Corp election, working LLC members are treated as employees and their wages are subject to employment taxes. The LLC business structure is often recommended for smaller organizations.
Check out this article to learn how an LLC is taxed.
Often a sole proprietor means someone who operates a business but reports the income on their individual taxes and doesn’t have a separate legal entity. LLCs are a legal entity that can provide personal liability protection, even if still owned by a single person. In other words, it can protect the owner’s personal assets from certain business debts or liabilities. Sole proprietors and single member LLCs are taxed in the same way, unless another tax structure (like an S Corp) is elected.
Check out this article to learn more about how a sole proprietor is taxed.
Check out this article to learn how an LLC is taxed.
Most traditional corporations like the ones that are traded on the stock market are C Corp. A C Corp is a tax status that is subject to double taxation — the C Corp pays tax on its income and the shareholders pay tax on the dividends they receive from the corporation. The corporate tax rate is less than the individual tax rate.
A nonprofit is a business structure that has requested tax-exempt status from the state and/or IRS. The nonprofit does not pay tax on its income provided the income is from activities associated with the nonprofit’s charitable purpose. Examples of nonprofits can range from charities to your kids’ local sports club.
We are happy to help! If you have questions, live support is available Monday through Friday, 8:00AM – 6:00PM Central Time. You may email info@mail.incorporate.hrblock.com or call (877) 472-1095. You can also access the chat function through the account management portal.
Check out our resource center to learn more about taking your business from self-employed to an LLC, C Corp, or S Corp.
The type of business you choose is critical as it affects everything from the taxes you pay to different liabilities.
As you start a new business, you must decide on a legal business entity. While many options exist, many business owners debate LLC vs. S Corp.
As you contemplate what to register your business under, you might come across two options: An LLC and a C Corp. We can help you understand both.
We are not a law firm or attorneys and our advice, products, and services are not a substitute for those of an attorney or law firm. This site provides general information that should not be construed as legal advice.