Difference between LLC Vs S-Corp

LLC Vs S-Corp

  • The owner of an LLC is considered to be self-employed and, as such, must pay a “self-employment tax” of 15.3% which goes toward social security and Medicare. The entire net income of the business is subject to self-employment tax.
  • In an S corporation, only the salary paid to the employee-owner is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. No employment tax on dividends paid to shareholders
  • The self-employment tax rate (15.3%) consists of two parts: 12.4% for social security and 2.9% for Medicare.
  • First of all there is nothing such as a ‘S Corp’ for entity formation purposes. When forming an entity – the state recognizes an entity as either partnerships, LLC or Corporation. S Corp status is ONLY for tax purposes. So after you form a LLC or Corporation and get the EIN, you have to file an election with the IRS (Form 2553) to treat your entity as a S Corp. for tax purposes.
  • regarding payroll, the Corp will have to pay 7.15% of the employment taxes and the rest of the 7.15% will be taken from your pay check. So effective you will be paying 15.3% from the corp. Running a payroll is not that costly and you can always signup with ADP/Paychex – who take care of the monthly/quarterly/annual filing of returns and paying payroll taxes. There charge is nominal, which again you can deduct as expense on the corp return.
  • If you want a 401(k), you aren’t limited to 100% matching. If the employer is a corporation, it can contribute up to 25% of payroll; if you’re self-employed, you can contribute up to 20% of self-employment income. Those are in addition to the $15,000 you can contribute as “employee.” Note that employee contributions are subject to social security tax, but employer ones aren’t. “Payroll” or “self-employment income” is computed WITHOUT deducting employee contributions.

Finally starting out

Finally, I am thinking to think about blogs seriously.
This particular blog page will serve the purpose of publishing my thoughts and findings about web frameworks and web applications for e-commerce (aka shopping cart) related websites.

Why I am starting to write blog?
First most reason is to make web presence of what I am doing.
I need to get YOUR comments.

Various topics to be covered are:

  • Existing e-commerce suites available
  • Existing j2ee solutions for e-commerce
  • Pros and Cons
  • Various observations of different frameworks and existing applications.

Frameworks and Applications, which I will be blogging about.

  • ElasticPath, only J2EE complete e-commerce application.
  • Other shopping cart solutions like MIVA, oscommerce, zencart etc.
  • My own open source (?) j2ee shopping cart framework coming up.