Project Description
- Married Couple, Two Kids, One Property
- Husband ran a small graphic design company in California earning business income reported on 1099MISCs
- Prior years filed as sole proprietor using Schedule C form which subjected all profits to self-employment tax
- For 2018 tax year, we created an LLC and converted it into an S-Corp to limit his exposure to self-employment tax
- Husband earned $200,000+ net profits in 2018 tax year
- Placed him on the company’s payroll at a reasonable salary with the remaining profits shielded from self-employment tax
- Final Results:
- Before S-Corp conversion
- Owed IRS $32,809 self-employment tax
- After S-Corp conversion
- Owed IRS $6,120 self-employment tax
- That’s $26,000+ savings in tax!
- Before S-Corp conversion