We've been looking at pros and cons of having an S Corp. Most may know that the biggest benefit is that there is no self-employment tax.
People in the 'gig' business could set up an S Corp with themselves as the sole owner and 'employee' and pay themselves a 'reasonable' salary from the profits.
Below is an excerpt from the website that has more detail. As always, you'll want to consult with a tax professional for your specific situation. "The big benefit of S corp taxation is that S corporation shareholders do not have to pay self-employment tax on their share of the business’s profits. But they will be taxed on the salary they pay themselves. This is the catch. Before there can be any profits, each owner who also works as an employee must be paid a “reasonable” amount of compensation (e.g., salary) that is subject to Social Security and Medicare taxes to be paid half by the employee and half by the corporation. As such, the savings from paying no self-employment tax on the profits only kick in once the S-corp is earning enough that there are still profits to be paid out after paying the mandatory “reasonable compensation.” #taxes#accounting#cpa#WednesdayMotivation