One of our School of Tax Strategy members, Nancy, asks the following question:

Q: As a Realtor who has one independent contractor and one part time employee working for me, what are the differences between forming an LLC and a Sub Cap S?

A: The general rule is that LLC's are great for businesses. LLC's can be taxed any way you want them to be taxed. They can be taxed as sole proprietorships, partnerships, S corporations and C corporations. You simply make an election. S corporations are good for a primary business because they are easy to operate and, done right, can reduce your self-employment (FICA and Medicare) taxes. So, I like to see LLC's that elect S corporation status most of the time.

There are times when you won't want to be an S corporation, such as when you are just starting up and have losses or when you need some flexibility with other owners. We have a great course on when and how to use S corporations at http://www.provisionwealth.com/products.

By the way, we have a School of Tax Strategy call tonight. Be sure to join in if you are a member. If you are not yet a member, call my assistant, Jessie, at 866.467.5809 and she can get you signed up.

Warmest regards,

Tom