Question for the Money Doctors
Question submitted on Oct 5, 2011.
QuestionHi there, I’m a student out at Embry Riddle at Travis AFB, taking financial accounting and our instructor referred us to your great site. I had a question re: Flipping houses business, my father and I just started. We are not yet incorporated, But want more information as whether to do an S-Corp, and how we need to structure the Corporation, quest like should we make ourselves employees to reduce the self employment tax liability. If you could help that we be great, or if you can recommend a good CPA who specializes in this area. I live in Stockton, CA.
The IRS frequently looks at S corporations and if there is no compensation to owners, will impute salary subject to FICA and Medicare.
Currently, LLC income is not subject to self-employment tax, so you might want to look at this type of entity. However, any payments made to members that are guaranteed payments for services rendered are subject to self-employment tax. There are also other benefits to the LLC structure.
Consulting a CPA is always a smart move when you are establishing a business, since he or she can determine what fits best in your particular circumstances.
For additional information visit http://www.360financialliteracy.org/