One of the most common questions I get is what entity to use for a business. There is no one right answer for everyone. That’s why we created a course on the use of entities called, Entity Fundamentals and another one called, Building the Perfect Foundation. You can find these at www.ProVisionWealth.com/products under our School of Tax Strategy.
Nancy asks the specific question about realtors. To wit:
Q: What advantages are there tax wise for a self employed Realtor to be an S corp instead of a sole proprietor?
A: There are at least three advantages that come to mind for being an S corp (or LLC taxed as an S corp) instead of a sole proprietor in this situation.
1. Self Employment tax – This is the big one. You can cut your self employment tax by 50% or more being an S corporation.
2. Audit risk – This is also big. You have 75% less chance of being audited as an S corporation than as a sole proprietor.
3. Reporting – Not often considered, you get much better reporting as an S corporation than as a sole proprietor. The reason is that an S corporation requires a balance sheet. You are much more likely to have accurate reporting when you do a balance sheet along with your income statement. This will not only lower your taxes (you will find more deductions with good bookkeeping), you will be able to make better business decisions.
There is a risk you must consider. If you receive all of your income from your brokerage, so you only receive one 1099, you risk being treated as a personal service corporation by the IRS. This can be devastating. It’s not an issue if you are receiving 1099’s from multiple clients or brokers.
In the end, S corporations, handled properly, can provide great tax benefits. We have an entire course about how to handle your S corporation at www.ProVisionWealth.com/products under our School of Tax Strategy.
Warmest regards,
Tom
Comments (6)
I would have to concur there, couldn't have said it any better myself.
Posted by Claude Stutheit | April 12, 2010 5:46 PM
Posted on April 12, 2010 17:46
I Apologize for my bad writing, I think its a informative piece of your writing. Well I will be suffering when having alot of difficulties in this condition but this blog helps me
Posted by debt | April 28, 2010 7:38 AM
Posted on April 28, 2010 07:38
great post as usual!
Posted by TomPier | May 8, 2010 1:12 PM
Posted on May 8, 2010 13:12
Aw, this was a really good post. In theory I'd like to write like this also - taking time and real effort to make a good article... but what can I say... I procrastinate alot and never seem to get anything done.
Posted by seo | May 18, 2010 4:13 PM
Posted on May 18, 2010 16:13
Thank you for sharing your stuff on blog. it's doubtless that we have similar interests. something are terribly useful to me.
Posted by Arla Chism | May 28, 2011 2:04 PM
Posted on May 28, 2011 14:04
Merci pour ce très bon article, je m'en reservirai pour mon propre blog !
Posted by audit referencement | June 2, 2011 7:33 AM
Posted on June 2, 2011 07:33