Q: I am registering a LLC in Florida. I want to avoid maximum taxes. While registering for my EIN, which should I choose?
Since the LLC will be a single member should I choose to be disregarded as an individual entity or register my LLC as a corp or S-corp? My main goal is to pay the absolute minimum taxes and to have the maximum deductions.
A: It somewhat depends. If you create an LLC that is a disregarded LLC with you as the single member, then you will have created a sole proprietorship. Whatever the net income is from the LLC you will be required to pay 15.3% in self-employment taxes above whatever your normal income tax rate is. In order to control that 15.3%, you can establish the LLC as an S Corporation and pay your self a "reasonable wage," which generally is about 30% of your total net income. However, the expense of operating another entity (ie. state corporate fees which are low in FL, and another tax return) may be more than the benefit of the self employment taxes you will save so you have to just do the numbers. I generally prefer to at least have an S Corporation if I make 50K or more in my business so that I can control what portion of the net income I have to pay 15.3% extra tax on by paying that reasonable wage. Under the new tax code, there is some benefit to a flow through entity and getting the 20% qualified business income deduction as well.
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