For the past two years I have been running a website as a sole proprietorship. Taxes have been absolutely brutal to me and I am looking to try to save money by incorporating. From what I understand, a single member S-Corporation (I am in California) would allow me to pay myself a "reasonable wage" and then pay whatever other earnings my website generates to myself as dividends.
So for example, as a sole proprietorship or an LLC if my website generated $100,000 in profit I would pay roughly 25-30% for taxes PLUS my self-employment tax of 15%. ... this would leave me with somewhere around $55-$60k. If I had this set up as an S-Corporation, would I be able to set a wage... say $30k for maintenance.... and then pay myself the rest as dividends free of any self-employment tax? This would mean.... 25-30% on 100k, and 15% on 30k... that would add up to around $65-70k as opposed to the $55-60
Am I understanding this alright? Are there other taxes I am overlooking?
2006-10-29
10:49:02
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6 answers
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asked by
Anonymous
in
United States