Okay...I've done all the research fully and have decided to make my photo biz an S-Corp because of the Social Security savings, etc. I know this has been a popular subject in the past and one I get asked about a lot. I'm putting together tons of resources on this now but want to share this ASAP (since it's Jan1)

I finally registered today (almost forgot ) .... thanks to a tip from my accountant (who is the CFO of PPA and knows this stuff) ... IT IS BEST TO REGISTER YOUR BIZ ON THE 1st of THE YEAR TO MAKE accounting/taxes/filing EASY (so you don't have to do taxes for both Sole & Corp)


There's a great run-down on the benefits of an LLC vs S-Corp and what the differences are here and I'll also copy it below.


I've used this company to register my businesses and you can order the forms and everything you need at the same time if you want too and it's worked out well for us.
***HERE IS THE LINK to register***



Cheers & Happy NEW YEAR!!!



LLC vs S-Corp:

It's smart to protect personal assets from business debts and liabilities. Both owners of S Corporations and LLC's enjoy limited personal liability. By contrast, sole proprietors and partners have unlimited personal risk.

Traditionally, business owners who chose to form an entity to protect personal assets but allow income/losses to be reported on a personal tax return had to create an S Corporation. Today, that can also be accomplished with an LLC. All 50 states and District of Columbia recognize LLC's, and their popularity has soared. Nolo's Legal Guide for Starting and Running a Small Business states, "For the majority of small businesses, the relative simplicity and flexibility of the LLC make it the better choice. This is especially true if your business will hold property, such as real estate, that's likely to increase in value."

Both S Corporations and LLCs allow owners to avoid "double taxation" and to pay income taxes on a flow-through basis like sole proprietors and partners. However, LLC's are quickly becoming a preferred entity among small business. Here are some key examples of the benefits of an LLC verses an S Corporation:

* An LLC is simpler and faster to form. It may be formed in one step, while an S Corporation election can only be made after a General Corporation is formed first.
* An LLC is not required to hold annual meetings or to keep formal minutes, while an S Corporation is required to do so.
* LLC members can split profits/losses in any way they choose. In an S Corporation, shareholders must receive dividends according to the number of shares that they own, regardless of the amount of effort put into the business.
* An LLC can be owned by any combination of individuals or business entities. Only United States citizens and resident aliens may own an S Corporation .Other entities generally may not own an S Corporation.

While many business owners are enjoying the simplicity and flexibility of the LLC, it may not be the best choice in every case:

* If you are professionally licensed and live in California, you may not be able to form an LLC. Live in California? Read more about the specifics of a California LLC.
* Enticing or compensating employees with stock options or stock bonuses requires forming a corporation since LLC's do not issue stock.
* S Corporation shareholders pay Medicare and Social Security tax only on money received as wages or salary, but not on profits received as dividends or that stay within the company. Under certain conditions, LLC members may need to pay Social Security and Medicare taxes on the entire amount of LLC profits. In particular, LLC's that provide professional services such as health, law or engineering should consult a tax advisor on this issue.

Thanks Liana! I was actually researching the pro's/con's of all of this earlier today, so this comes at a great time!

Great info.

I filed as an s-corp about 5 years ago, and I feel it was the right choice for me.

The prices on the site to register are not to bad. If you live near the Gov't buildings you can file for even less. In Chicago it was $100, took about 20 minutes.

Happy 07 everyone,

Yeah, all that stuff gets confusing - what formation to go with - glad it's of help

Thats great stuff Liana - thanks for researching all that! I wish we were a little more organized in that respect. We were just making lists of stuff we have to go through for our 2007 business plan this afternoon, and Im not sure what we are going to do from that standpoint. What did you do early on in your wedding photography days as far as your business organization?

This is great info, Liana! I'm curious as to why you chose the S-Corp over a LLC since the benefits you listed seem to favor the LLC route. I'm going through the same thing at the current time and, interestingly enough, It's been recommended to me to make my biz a LLC. The January 1st thing makes sense!

You also mentioned "...Social Security savings..." . . . are there any other major benefits that swayed you towards the S-Corp?

Thanks for sharing some of your wisdom with us!

Brian

Thanks for posting this, Liana! I never thought about the 1st of the year being the best time to do it. I had planned to do it soon, but after reading your post, I just filed (I picked LLC)! Thanks!

Autumn

Hey Mike!! Happy New Years I was Sole Proprietor my first few years in business for my photography but probably should have gone with LLC or S-Corp earlier. It really just makes everything easier to be organized up-front (bank accounts, formation, etc), IMHO but it's taken me 7 years (for the photography biz anyways) to really sit down and do it.




Hey Brian - When I looked at my financial forecasts for next year, it does look like the extra time it takes to file/be an s-corp will pay off in SS-Savings (as mentioned above I can take a portion of my income as "dividends" instead of "income" and that portion is not taxed for social security). Plus, I don't have a partner in this biz (if I did I'd be an LLC because it's easier to distribute dividends between individuals).

Makes sense! Thanks again, Liana!!! Looks like I have some quick decision-making to do!

Have a great 2007!!!

Brian

Yeah - it really could go either way - both are great options. Funny - one of my businesses is an LLC, the other an S-Corp. Good luck & happy 1st day of 07'!

Thanks Liana, and a Big Happy New Year to you as well !!! Another for you...if its a husband and wife team, whats the recommendation?

If I remember correctly, the recs were to treat a husband/wife team similar to a single owner - since it's all under the same household. If I had filed earlier in my career, I would have started as LLC and then eventuallly gone S-Corp when the biz got big enough for SS-savings rewards to be worth the filing.

Thanks, we're on board now!!!

I had my lawyer set up my s-corp...I am still clueless but botH my lawyer and CPA said this is a good thing based on all factors involved.....I dont have the time to learn it so it was worth the money to have them do it for me :-)

Thanks for the info Liana! I'll be on my own here soon so this is great to know. mucho appreciation.

E

Great post liana! matt and i became an s-corp earlier this year - and when my accountant ran the numbers on the differences in taxes paid as an s-corp versus llc - i was sold. seriously - pretty darn significant.

hiring a great accountant was one of the best things i did this year!

So it's taken me a while to get around to this stuff with a move and everything since 1/1 ....

But here's a quick update (I had a great talk with the Company Corp today to verify the final steps in the s-corp filing from sole proprietor) :


1. Got papers from the state back (I had the company linked above file my Articles and register for me) including my Incorporation Papers & Articles

2. Went online to Georgia.gov and found link to register for my federal EIN # - registered with form online. Don't leave any spaces in the form - it won't let you submit - it's not terribly user-friendly.

3. Registered online for state tax filing (need to have EIN # and Corporation filed BEFORE this step). When they asked for my "Type of Business" I check "Corporation" and type in "1120s" when it asks for the form that I'll be filing (this shows them that I'm filing as an S-Corp)

4. Went to bank to open up NEW Biz checking (and other Biz accounts) - they use the info/papers from step #1 & #2 to do this - you want to have your EIN# and your business name on records before you do this. Personal accounts are all seperate and use the SS# - gotta keep 'em sep-ar-ated!

5. Now's the time to set up all accounts (giving, savings, & investing automatically routed out of appropriate accounts) and apply for any additional licenses or merchant accounts. It's also a good time to get a safety deposit box so you can put backup files/drives/papers in there. You can get a HUGE one for ~$120/year

Okay... who wants to do my taxes now !?

Hey gang,

On a related note, I work on a MAC and I'm looking for a good book keeping program. Any suggestions? My wife and I have been using Quicken but we mostly just do the basics.

I've been an S-Corp for a couple of years now but actually was thinking of dissolving the business and going back to sole proprietor. Just something we discussed today while at the accountant's office. Not sure though....just when it comes around to paying salary every month the whole book keeping thing can get to be a little overwhelming. But after reading what Liana had to say, I was thinking I might just keep it the way it is b/c of the advantages of dividends.

Any thoughts?

thanks,
Michael

I assume it works for MAC, but successware seems to be the best available for photographers, but pricey

Successware - for sure!

It's well worth the $49 per month if you actually use it and take the training