S Corps Are the New LLCs

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LLCs have been one of the most popular business structures in America for many years now, However, S Corps are rising in popularity. In fact, many people believe that they are the new LLCs. There are now over 5 million S corps in America and counting. Soon, this number could be much higher.

In this video, tax expert Karlton Dennis breaks down all of the key reasons why S Corps are becoming the new LLCs and why they are starting to compete with them in terms of popularity.
Points he covers include the rules for S Corps, how to set one up, and the advantages that they have over LLCs.

If you are someone who is trying to figure out which entity structure to use for a business, then this video can provide you with key S Corp information to help you make your decision. Like LLCs, S Corps have liability protection, but they have a number of other important benefits that LLCs don’t have.

CHAPTERS:
0:00 Intro
2:20 LLCs and Self-Employment Taxes
3:36 How S Corps Solve the Problems with LLCs
4:36 What Portion of Your S Corp Income Should You Take as Salary?
6:02 Should You Switch Your LLC to an S Corp?
6:56 Will S Corps Eventually Replace LLCs?
7:59 Rules for Switching Your LLC to an S Corp
8:54 The Bottom Line
9:25 Outro

*Disclaimer: I am not a financial advisor nor am I an attorney. This information is for entertainment purposes only. It is highly recommended that you speak with a tax professional or tax attorney before performing any of the strategies mentioned in this video. Thank you.

#llc #scorp #businessowner

[joaquimresende]

LLC is the Legal entity AND can have an election to be taxed as an S Corp, so it’s not one vs the other.

[iamraya]

Common Legal Designations:
Sole proprietor
Partnership
LLC
Corporation

Tax Classifications for Legal designations:
Single member sole-proprietorship
Partnership
S-Corp
C-Corp

LLC’s and Corporations are eligible to be S-Corp or C-Corp tax classification entities depending on what makes sense for them. (S-Corp is not a legal entity but rather a tax classification, please understand the difference)

[hozay]

Started with an LLC back in Nov. Took me till Feb to file the S-corp election. It's pretty easy to do, just 1 form. Then use a payroll software like Gusto to handle all the other tax stuff (social security etc...). Pro tips: "paying your self" only 30% is dangerous if your making a lot and could trigger an audit. Also I wouldn't do it till you were making over $80k.

[THEtaxstrategists]

His advice is mostly correct but as usual, KD misleads with hopes you will hire him. A LLC or a Corporation is a type of legal entity and has nothing to do with the taxation. If you have a qualifying entity such as an LLC and a Corporation formed in the US, you can ELECT to be treated as an S Corp for TAX PURPOSES. I would also say it is unwise to do so at his suggested $50k level. PLEASE PLEASE find a local CPA that is qualified in providing tax advice and engage them - do NOT look for your tax advice from KD. The stuff he tries to sell as "secret sauce" is VERY VERY basic!

[LADETROIT]

One of the earliest subscribers. And at the time I wondered why this guy didn't have 10 times more. Glad to see many discover him.

[reginaargentin]

i love your clarity. it is helpful to me because I went to art school, not business school. I am a creative that designs and manufacters sustainable products and I hate math and anythig to do with staring in a computer so i need clear direction. thank you

[TT-vsti]

Helpful info Karlton! You are inspiring!

[greenxintet]

Theres taxes for everything. Gonna eventually have to declare the amount of times I use public restrooms for a urination tax

[yesicare]

Excellent content! Thank you 👊🏽 My wife and i own a small biz. I manage day to day. She works full time for company making $130k per year. How should we structure her income within our biz to drive down her tqx liability? And benefit the biz?

[MrJohnadams]

We just started our S-Corp this year and I am so glad we did.

[THEtaxstrategists]

So Karlton tells you NOT to put real estate within an S-Corp. He is correct since among other reasons, upon death, the ASSET within the S-Corp will not be stepped up to FMV and moving the ASSET out of the S-Corp structure could trigger gain under IRC Sec 311(b) - he is correct. However, for some reason, he does not recognize that if you build a successful business and die with it, owning that business WITHIN the S-Corp is also unwise for the same reason. The successful business within the S-Corp HAS VALUE! This is known as "intangible value". The IRS recognizes this under Section 197. If the successful business is held within an LLC for example, upon death, the business value will receive a step up to FMV and allow heirs to (a) amortize the FMV over 15 years or (b) sell at no or little gain. KD is very inexperienced in long term tax planning. Find someone who has been doing work for decades and can provide long term tax advice. Karlton - am I wrong?

[kalebstout]

Thank you so much for taking the time to create this. I run a small RV detailing business, and I’ve just been doing cash but want to open an escort in maximize my benefits. Curious how I would put as a partner and pay them salary or is that not allowed?

[THEtaxstrategists]

KD - explain why you think that LLCs are best for real estate

[JacobCenteno]

Carlton, I appreciated the deeper insight in this video vs the others you have done on s corps. My question is this - what happens to the money that stays in the business bank account through the end of the tax year. Ie. 30k salary, 70k distributions and I have 25k in the bank account. How is that 25k taxed?

[richardjoseph]

Thanks for the great video! I keep getting conflicting information. Do LLCs have to pay quarterly estimated tax?

[KristnaSaikiaBillFortuneEagle]

Your video is very informative. You are handsome, fit, and charming! You are also an eloquent speaker. 😊😅

[melissastewart]

I didn't understand your comment about LLCs being best for realestate. I'm a realestate investor with gross income of $150k currently set-up as an LLC and was with you about converting to an S Corp until that brief comment toward the end of the video.

[theFrostySurvivor]

You're friggin' impressive! Thanks for the tip!

[thisisthewroten]

So my current holding company I’m using to pay myself from my LLCs. Should I switch that holding company to an s corp?

[Shack]

But can you use the 70% (in distributions) for personal purchases or solely company-related purchases?