Online Incorporation MaxBlog

Determining the best corporate status for your business has many considerations. When thinking about self-employment taxes however, forming an S corporation offers a clear-cut benefit over forming an LLC. This tax applies for such things as Social Security and Medicare, much like the payroll tax deducted from ones paycheck.

In an S Corporation, an individual shareholder only pays tax on salaries and bonuses they receive from the company. On the other hand, a shareholder in an LLC pays on both salaries/bonuses and their share of profit in the company, which can amount to more than 15% of taxable income.

“Can S Corporation Status Reduce Self-Employment Taxes?” in MaxFilings’ Knowledge Center addresses this issue and raises other important considerations you must be aware of.

By ALEX PHILIPPIDIS

Eleven years after New York state first extended to startup business owners the liability protections of corporations, entrepreneurs are increasingly taking advantage of them, judging by five years worth of new-business filings.

The number of doing-business-as filings dipped 20 percent between 2000 and 2004, when 3,931 DBAs (doing business as) were recorded by the county clerk’s office.

No similar dip is evident, however, in the new corporate filings recorded by the state Department of State. During the same five-year period, the number of corporations, limited liability companies (L.L.C.s), limited partnerships and limited liability partnerships remained steady, a combined 4,947 filings processed last year - 27 more than in 2000.

Nationwide, the number of new businesses dipped less than 1 percent between 2000 and the most recent available year of 2003, when 572,900 new businesses were recorded.

John Tolomer, senior vice president and Westchester/Connecticut marketing manager for Commerce Bank, which operates five Westchester branches, said many entrepreneurs are wising up to the tax advantages of corporate filings. L.L.C.s and subchapter S corporations allow earnings to flow to owners and are taxed once at their personal income tax rate, versus the dual taxation of traditional corporations.

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