My employer has agreed to pay me under the name of a business. I have heard if I start a business and get paid under the business name I can pay less taxes, Is this true ?
My second question is which form of business should I go for ? LLC or Sol P. to pay less taxes ? Im not worried about liability
2007-03-14 10:22:48 · 4 answers · asked by alireza_f 1 in Business & Finance ➔ Taxes ➔ United States
Both a single-member LLC and a sole proprietorship are treated the same way for tax purposes. You would be considered self-employed and activity from either entity would be reported on Schedule C of your individual tax return. You would be subject to self-employment tax of 15.3% in addition to federal and state taxes. You would also be able to deduct any business expenses you have. You could deduct your health insurance premiums you pay, as long as you have net income, and you could also set up a SEP retirement plan. You could make large contributions to the plan, which are tax deductible. You would gain huge tax benefits while saving for your retirement.
2007-03-14 10:48:08 · answer #1 · answered by tma 6 · 1⤊ 1⤋
The tax bite will be the same either way. And it will be HIGHER than if you are an employee.
If you go that route you will have to pay the employer's portion of the Social Security and Medicare taxes. You also will have difficulty claiming unemployment if you lose your "job". You'll lose any employee benefits that you are currently getting as an employee, if any.
This is a great deal for the "employer" but a lousy deal for the "employee". Unless they're willing to boost your pay by at least 50%, tell them to stick the tax dodge and pay you as an employee.
The ONLY reason that employers pull this stunt is to cut their tax and payroll costs. The poor schlubs that get sucked into the deal ALWAYS come out on the losing end of he deal.
2007-03-14 18:22:18 · answer #2 · answered by Bostonian In MO 7 · 1⤊ 0⤋
My advice is to always consult a tax professional if you have any doubts or concerns. However, you can save money on any tax expenses that you have this year. I went to the site below and was refunded all of my H&R Block tax expenses. I simply went to the site, filled out my information... and voila! I just found the site this year, so I have not idea if they offered this service before or not. However, I will be looking for them again next year.
2007-03-15 15:40:23 · answer #3 · answered by Jason C 2 · 0⤊ 0⤋
They are both taxed the same.
The differences are in the legal protections that an LLC "may" offer.
2007-03-14 17:56:44 · answer #4 · answered by Wayne Z 7 · 0⤊ 0⤋