What are the differences in how LLCs are treated for tax purposes versus an S corporation?
First, the following is VERY general. For specific information, see an accountant or tax advisor. As an LLC, you will be treated as a sole proprietor (if you are a one member LLC) or as a partnership (two or more members) for tax purposes. Thus, you will still have to pay self-employment tax, but you will enjoy the limited liability protections of a corporation. As an LLC you can also choose to be taxed like an S or C corporation by filing IRS Form 8832. One big advantage to an S-corporation is that you dont have to pay self-employment tax. Of course, you should pay yourself some kind of a salary, which will be subject to FICA (goes toward Social Security and Medicare benefits). But, you can pay yourself some income in the form of a dividend, etc. without incurring additional FICA payments.
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