Are you receiving a 1099 from work every year? If so, you might want to look at creating an S-Corporation. An S Corporation is a corporation that has elected to be taxed as a flow-though entity (similar to an LLC or Limited Partnership). This type of taxation, the S election, allows the shareholders to be taxed only at the individual level instead of at both the corporate and individual level, thus avoiding the double taxation like the C Corporation. There is no federal income tax levied at the corporate level, unlike C Corporations which are taxed at both the corporate level and the individual level, thus earning the description “double taxation.” S Corps are favored by many business owners for their single taxation (as opposed to the double taxation of a C Corp) and limited liability protection.
Also, unlike a sole proprietor, there is no self-employment tax on your tax return (line 57). Go look at your tax return from last year and just imagine the savings you can have by simply making the switch. With an S-Corporation you have limited liability while a sole proprietorship has unlimited liability. The safety net an S-Corporation provides compared to a sole proprietorship is incomparable.
So if you’re ready to save money on taxes, give us a call and we can make the switch for you today. If you receive a 1099 and don’t have an S-Corporation set up, you are missing out on massive savings. Let us help you.