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BUSINESS STRUCTURES

  • Sole Proprietorship or Limited Liability Company
  • S Corporation or Limited Liability Company filing as an S Corporation
  • S Corporation or Limited Liability Company filing as a C Corporation
  • C Corporation or Limited Liability Company filing as a C Corporation

SOLE PROPRIETORSHIP OR LIMITED LIABILITY COMPANY

These business structures have expensive tax burdens. Business net income is taxed according to income bracket amounts with extremely high federal percentage rates (10% to 37%), but lower state percentage rates and a standard 15.3% self-employment rate.

Examples: A & B

Business structure example without comprehensive income tax planning

  • Business Net Profits and Taxable Income: $100,000 reported on Federal Form, Schedule C.
  • Taxable Income: $85,400 ($100,000 - $14,600 Standard Deduction)
  • Federal Tax: $18,788
  • State Tax: $4,057
  • Self-Employment Tax: $15,300
  • Total Tax: $38,145
  • Income After Taxes: $61,855

Business structure example with comprehensive income tax planning

  • Business Net Profits and Taxable Income: $100,000 reported on Federal Schedule C.
  • Salary: $47,150
  • Standard Deduction: $14,600
  • Taxable Income: $32,550 ($47,150 - $14,600 Standard Deduction)
  • Federal Tax: $3,906
  • State Tax: $1,546
  • Business Side FICA: $3,607
  • Employee Side FICA: $3,607
  • Total Tax: $12,666
  • Tax Cut: $25,479 ($38,145 - $12,666)
  • Restructured Income: $53,284 (Cash Retention)
  • Fringe Benefits & Perks: $27,657 (Business Paid Household Expenditure Items)
  • Discretionary Spending: $10,000 (Business Paid Personal Choice Spending)

S CORPORATION OR LIMITED LIABILITY COMPANY FILING AS AN S CORPORATION

This business structure has an expensive tax burden. Business income is taxed according to income amounts with extremely high federal percentage rates, but lower state percentage rates (10% to 37%), and without the standard 15.3% self-employment rate.

Examples: A & B

S Corporation Example without comprehensive income tax planning

  • Business Net Profits and Taxable Income: $100,000 reported on Federal Form 1120S.
  • Taxable Income: $85,400 ($100,000 - $14,600 Standard Deduction)
  • Federal Tax: $18,788
  • State Tax: $4,057
  • Total Tax: $22,845
  • Income After Taxes: $77,155

S Corporation Example with comprehensive income tax planning

  • Business Net Profits and Taxable Income: $100,000 reported on Federal Form 1120S.
  • Salary: $47,150
  • Standard Deduction: $14,600
  • Taxable Income: $32,550 ($47,150 - $14,600 Standard Deduction)
  • Federal Tax: $3,906
  • State Tax: $1,546
  • Business Side FICA: $3,607
  • Employee Side FICA: $3,607
  • Total Tax: $12,666
  • Tax Cut: $10,179 ($22,845 - $12,666)
  • Restructured Income: $61,482
  • Fringe Benefits & Perks: $29,459

C CORPORATION OR LIMITED LIABILITY COMPANY FILING AS A C CORPORATION

This business structure has a lesser expensive tax burden. All Business income is taxed at a 21% federal percentage rate and lower state percentage rates.

Examples: A & B

C Corporation Example without comprehensive income tax planning

  • Business Net Profits and Taxable Income: $200,000 reported on Federal Form 1120.
  • Salary: $150,000
  • Personal Taxable Income: $135,400 ($150,000 - $14,600 Standard Deduction)
  • Personal Federal Tax: $32,496
  • Personal State Tax: $6,432
  • Total Personal Tax: $59,644
  • Total Personal Income After Taxes: $90,356

C Corporation Example with comprehensive income tax planning

  • Business Net Profits and Taxable Income: $200,000 reported on Federal Form 1120.
  • Salary: $47,150
  • Standard Deduction: $14,600
  • Taxable Income: $32,550 ($47,150 - $14,600 Standard Deduction)
  • Federal Tax: $3,906
  • State Tax: $1,546
  • Total Tax: $12,666
  • Tax Cut: $65,940
  • Restructured Personal Income: $117,592
  • Restructured Business Income: $38,250
  • Total: $155,842

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