AboutRichard Fritzler Expertise Specializing in Business and Corporate taxation. Comparing the advantages and requirements of different business entities, such as Sub-S Corporations, LLC`s, Partnerships (Both Limited and General), Doing Business as a Sole Proprietor, or Using a C-Corporation. Issues regarding K-1 distributions, 1040, schedule C, 1120, 1120s. Are you considering domiciling a Corporation in a low tax state? I can review the benefits and misinformation that exists.
Experience I have been in the business of assisting business owners in reducing their taxes and liability since 1986. The company is Owelesstax, incorporated, at www.owelesstax.com
Organizations National Small Business Owners Association. Publications Contributing author to "The Corporate Standard Newsletter".
Publications Contributing author to "The Corporate Standard Newsletter".
Question Forming a 3 person LLC. I am doing most of the work and we wish to setup so that the LLC has equal percentages in shares but that I would get first 60K out of 100K in profits. Is it better to setup as a guaranteed payment or as profits interest such as "B" shares? Or other better alternatives?
Answer LLC's don't issue shares, there is no option to create different classes. The owners are members. Distribution to members has to be commensurate with ownership percentage.
There are much better alternatives but all of them start with "Not an LLC".
If you are dead set on the LLC the most expredient way for you to pay the highest tax soonest is to put you on salary for $40k. then when the next 60k comes in you can get 1/3 of that. I think that gets you to 60 out of a hundred.
You did notice the HIGHEST TAX SOONEST phrase. All of the money, not just you salary, but also all of the distribution will be subject to Social Security, Medicare, Workers Comp, UnEmployment, Federal Income tax rates, State and local income tax rates. And whatever is left is all yours. If you want to use it invest in the business, go ahead, but you won't have much.
On the other hand, if you keep all, most, or some of the money at the business level, then taxes are much more friendly on that money. No social security, no medicare, no workers comp, no unemployment, AND you would be paying lower federal taxes. If you can operate it properly you that would also mean NO STATE OR LOCAL taxes.
