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Take that for what it's worth.
The article suggests, but doesn't explain why LLC / S-Corp is better if you are taking all the money out. It feels to me that if you don't have to retain any money, then they both collapse to the same situation more or less. The only difference being C-Corp needing more expenses in accounting (and maybe legal) to just keep the books in order, but that is not a significant factor.
What isn't mentioned here is that an LLC is relatively straightforward to set up, an average Hacker News reader could set one up in their state with a few hundred dollars and no lawyer. S-Corps are more complicated (you will need a lawyer), and C-Corps are VERY complicated (you will want at least 2 lawyers). The amount of legal fees and time spent creating the different corporations varies immensely. It's not as simp…
This is true but it should also be noted that in some states you can get taxed a significant amount of money per year on your LLC. California, in particular, has an $800 minimum tax per year on LLCs, regardless of whether you've earned a single dime.
$800 a year isn't much if your LLC is an actual money making venture, but is pretty significant if you are just using it for what amount to basically side projects.
The article suggests, but doesn't explain why LLC / S-Corp is better if you are taking all the money out. It feels to me that if you don't have to retain any money, then they both collapse to the same situation more or less. The only difference being C-Corp needing more expenses in accounting (and maybe legal) to just keep the books in order, but that is not a significant factor.
What isn't mentioned here is that an LLC is relatively straightforward to set up, an average Hacker News reader could set one up in their state with a few hundred dollars and no lawyer. S-Corps are more complicated (you will need a lawyer), and C-Corps are VERY complicated (you will want at least 2 lawyers). The amount of legal fees and time spent creating the different corporations varies immensely. It's not as simp…
"What isn't mentioned here is that an LLC is relatively straightforward to set up, an average Hacker News reader could set one up in their state with a few hundred dollars and no lawyer." This is true but it should also be noted that in some states you can get taxed a significant amount of money per year on your LLC. California, in particular, has an $800 minimum tax per year on LLCs, regardless of whether you've ear…
What isn't mentioned here is that an LLC is relatively straightforward to set up, an average Hacker News reader could set one up in their state with a few hundred dollars and no lawyer. S-Corps are more complicated (you will need a lawyer), and C-Corps are VERY complicated (you will want at least 2 lawyers). The amount of legal fees and time spent creating the different corporations varies immensely. It's not as simp…
The corporate tax rate is very high and should really be thought of as 35% if you have meaningful profit.
You may also be able to defer profit if you're delivering service after you're paid for it (and you should be doing this), this keeps more money in the company without paying the taxes immediately. A far more important lesson.
Being in a higher tax bracket doesn't lead you to pay more tax on your initial income, only a higher rate on money above a certain threshold. That said, the article is right in that an S-Corp or LLC sound right and are rarely a good idea because you sometimes lose out on certain tax deductions because your personal income is too high. Remember though, a tax bracket is a sliding scale... see the margin tax rates table…
Your first $40k may be taxed at 10% and your next $20k may be taxed at 15% or whatever, but you are not "in a tax bracket".
The idea of being "in" a tax bracket gave rise to the dumb idea that making more money can net you less after taxes, which is virtually never the case.
S Corps are referred to as "Professional Corporations". Their intended purpose was for Doctors, Lawyers, Consultants etc. and other people looking for liability protection for services they provide. I believe in some states they even restrict the number of shareholders. Take that for what it's worth.