Why You Should NOT Form an LLC!
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- Опубликовано: 5 сен 2024
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ebook.taxalche...?Certified Enrolled Agent Karlton Dennis has seen everything in the game, using his knowledge to take advantage of his tax-return every year to write-off some quite luxurious items. The thing is, ANYBODY can do this! How? Find out on today's Taxes Made Simple!
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*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.
#taxes #taxfreeliving #taxexpert #taxreduction #llc
Thank you Everyone for the support on my channel and for liking this video. I plan to make more videos that very concise on calculations. Thank you for following along!
Karlton: best explanation I have ever seen or heard. Bravo!! Thank you very much. You make it look so easy.
Excellent video! Thank u! 💕☀️
What about having an LLC but filling out a form 2553 to pay taxes like an S Corp?
@@jlleonard3yes can you elaborate on this?
Why not just create an LLC with a 2553 election? The election means the entity is treated as an S-Corp for tax purposes, but has more flexibility in other areas.
Simple yet accurate informations. this will certainly save lots of money and time for many id us by avoiding others early mistakes. i'am currently on the way to setup an llc with LegalFave. Thank you.
sounds like the way I'm going to start my business owner life style too
😊😊
Great video and explanation between the different structures.
The LLC and S-Corp tax calculations aren't correct though. QBI (20%) is calculated on the business net income (92.35% of LLC net income and 100% of S-Corp income) directly, not after the standard or itemized deduction. Self employment tax is calculated at 15.3% of 92.35% of business net income, not on net income minus standard deduction, minus QBI. The 92.35% represents the difference for 7.65% (half) of self-employment tax. The LLC calculation for SE tax would be $14,130 ($100,000 x 92.35% x 15.3%). The federal tax would be calculated from $100,000 less standard deduction of $12,550 less half of SE tax of $7,065 less QBI deduction of $16,077 (The lower of 20% of 92.35% of $100,000 or 20% of taxable income before QBI deduction which is $80,385) for a taxable income of $64,308. The federal tax due on $64,308 is $9,900 plus SE tax of $14,130 for a total of $24,030.
Regarding the S-Corp calculation, you treated the owner wages ($35,000) and business net income ($65,000) as they were each on their own tax return when calculating the tax due. The tax calculation and brackets should be based off of $100k of income as a whole. $35,000 in wages at 15.3% is your self employment tax. $62,323 is now your S-Corp profit after expensing owner salary and the employer portion of the SE tax. QBI is calculated at 20% of the $62,323. The taxable income would be $97,323 less standard deduction of $12,550 less QBI deduction of $12,465 (20% of $62,323) for a total of taxable income of $72,308. The federal tax due on $72,308 is $11,660. Add in the SE tax paid through payroll of $5,355 and you end up with a total tax of $17,015.
In this scenario, the direct federal tax benefit of the S-Corp vs. the LLC would be $7,015 ($24,030 - $17,015). This is not considering higher tax prep fees, payroll processing fees, and state payroll taxes for the S-Corp. However, I wouldn't always advise clients to take only 35% of profits as salary. This is highly dependent on the industry, scope of the work being performed, and the amount of time that is spent on the business. The IRS has a different definition of "reasonable salary" than that of the EDD of California. If there is an IRS audit and they determine the salary paid to the owner is not reasonable, a portion or all of the remaining profit could be reclassified and subject to SE tax as well, along with interest and possible penalties.
Anyway, I love what you're doing and I think a lot of new business owners can gain a great deal of knowledge from your channel. This is by far my longest ever RUclips comment, and I could have definitely spent this past hour in a much more efficient way.
The clarity was needed! Thank you both!
Thank you for this clarity. I thought I was tripping lol
Thank you!!!!
Thank you for this breakdown.
Wow… your hour was well spent and appreciated.
The title and the video are misleading. What you do is you form an LLC and then you elect to file your taxes as an S-Corp with IRS. Simple as that. I have been doing that for the last 20 years and it has nothing to do with the year 2020. You can't just "open up an S-Corp" without having a company first. If you are going to be giving legal advice on YT, better make sure you know what you are talking about. One more thing, S-Corp is not "a kind of company." It's just a special treatment you get from the IRS when filling the taxes. It has NO POWER or ANY relevance when it comes to your state, state taxes, lawsuits or company protection. The bigest reason people elect LLCs is for personal protection and what you are doing here is telling people they should not have that, because "they might save some money from the IRS."
Can you help me get this started?
Low key I was thinking that too. That from a protection stand point I wouldn't tell ppl not to get a llc
I took it as he was saying more people are switching to S Corp for the tax reductions. In this video, he stated he thinks 45k is that threshold.
This was powerful. Where can we find more of your content ?
YES, LLC can protect you to a point but, in return the maintenance of a LLC is not worth the time. Either way you go all eyes are on "YOU AND YOUR MONEY HIDDEN AWAY IN A SHOEBOX IN A CLOSET UPSTAIRS ON THE SECOND FLO....
Been studying LLCs and taxes for a week to prepare for a new business venture. It’s been confusing to say the least. This video blew my mind and I finally can wrap my head around how I am going to plan for the future. You are amazing my man. Thank you so much for this breakdown and clarity.
LLC is great if your the only owner and you want pass through taxes. If you are raising money start as an S corp. You get loses as tax credit spread over the ownership structure and can sell stock.
@@jay-by1se Can two people start an S-corp? with no guarantee of a payrol?
I'm sorry you're so confused! I have a free webinar next month to remove that confusion!
Same same same!
@@ENHQwell I'm confused. First I hear LLC Is the Best to have, now He saying switch from llc 🤦🏾♀️🤷🏾🤔
This is what I’m learning in my business class and here it is your giving it to me for free no student debt 💸
THANK YOU!!!
Crazy isn't it.
I called it YTSU, RUclips State University in my house 😉🙋♂️🤩
@@t-fuelernienotoriousmisfit7449 i always said Google University
@N Diesal explain?
@@richdibo I kind of agree. It's like somewhat correct but not entirely correct. Its like saying frozen yogurt is ice cream but with no calories. It is not ice cream, and it does have calories, just a bit less.
This is the best explainer I've seen on the subject. Good job. Although you might want to mention that an S-corp is just a tax designation. You have to form your LLC or other legal structure first, and then elect to be treated like an S-corp
I think he briefly brushed it at approx min 7:50
Please clarify whether an LLC can elect to be taxed as an S-Corp.
@@ladynaturally595 An "S-corp" is simply a federal tax designation. It is not a legal entity in itself. Many types of businesses (LLC, C-corp, partnerships) can elect to be treated as S-corps. In the self-employed context, people most often use an LLC taxed as an S-corp.
The teacher just got schooled will well said sir
And he should also mention you can only make the change once to an s-corp
I was self-employed receiving a 1099 for years. I started with an S corp because I had an income. Your presentation was excellent.
with an S corp you MUST HAVE WORKERS COMP..WITH AN LLC your health insurance covers you(except for the disability part of comp} If you are an S ,your health insurance will deny your claim in an S corp...if you are in a highly physical occupation,YOUR COMP COULD COST 15,000///LLC for me..with a W-2 to myself for the first 40k....save s FICA..ALL the other tax is the same....but low FICA bill today means low Social security checks later..
If you already have an LLC, you can opt to be taxed as an S-Corp or C-Corp instead of a pass-thru entity by filing some paperwork with the IRS. If you do not fill out that paperwork, your LLC is treated as a pass-thru entity. So an LLC does not have to be a pass-thru entity if you and your tax advisor decide that is the best course of action.
Exactly. An LLC can elect to be taxed as an S-Corp and a yearly one page report to the Secretary of State is all that's needed. You don't have to pretend to have a board of directors or Meetings. This guy looks the part but this is a huge omission.
@@researcher4good True. The LLC only has to follow the requirements in the Operating Agreement and state law concerning LLCs. So there still needs to be documentation of major decisions by the member(s) or the manager(s), and contracts and such need to be in the name of the LLC, not the owners. So LLC formalities must be followed instead of corporation formalities, if it's an LLC.
@@researcher4good Massive omission. LLC at the entity (not tax) level is clearly superior to S or C corporation. You pick your tax treatment and enjoy superior outside liability protection as well as a simpler management structure and reduced corporate formalities.
@@Alex-er6xm Protecting from child support... just as or more likely to backfire as work. Consult with a family law attorney in your state sorry can't advise.
Great Job! One thing that should be mentioned is the cost to set up the LLC, the cost in CA for the annual filing fee, and the additonal cost for tax returns. I normally tell my clients when they make about $50,000 net income, its time to consider becoming an S Corp.
or they can move out of california to avoid those crazy taxes.
becoming an S corp instead of an LLC WITH S corp tax has ONE BIG BENEFIT///A TRUE S corp requires workers comp insurance!!!If you have a PHYSICAL occupation,,,LIKE CONSTRUCTION...your comp can be 12,000 bux a year!...with an LLC this is not required!....the cost to set up an llc is 700 bux in missouri..California is probably more and a yearly fee is in place there...
@metalrooves3651 Incorrect. It does not cost $700 to start an LLC in Missouri. It's $50 plus like $1.25 fee. Not sure where you got $700 from
I AM groosly incorrect,,i meant to say I SPENT 700!!its 51 dollars.i hired a lawyer to make it more bulletproof for 650!@@ImThatAuntie
@@ultraret~ Nothing is that simple. Your advice is akin to tell someone in an abusive relationship to just leave. There are far too many nuances. You are just giving a broad idea for complicated decision. If they are the owner of a small business and they only make $50k net income, they don’t have enough to just jump ship. If they own a physical location, they need to stick around to manage it. $50k is not going to cover the flights and COL (cost-of-living) it will take for constant trips. Hiring a manager to help is more money if they didn’t have one first. Physical locations require maintenance and have bills. Again $50k is hardly enough to; pay for your location’s rental fees, maintenance fees, paying yourself, paying employees if you have them, and actual expenses directly related to your company.
Starting a business in Californians has plenty of advantages that outweigh the negatives. If a person is concerned with running from taxes as a small businesses, they weren’t ready to start a business in the first place. It is larger corporations that have to start looking at relocation, not small business. If a person moves when they haven’t even reached $100k net, their business will suffer. They would essentially have to start over. Especially, if their company has a customer base of mostly California (or their foundation state) residents.
I was taught that the purpose of an LLC was not for tax purposes, but for liability protection. If a business is sued, the liability is limited to the assets of the company, not the owners. Hence the Limited Liability Corporation LLC moniker.
But Isn’t the protection limited in an LLC? How protected are you?
@@DagrtOne Yes, it is limited. The limit is the assets of the LLC, the personal assets of the owner(s) aren't included. Simplified.
That is the main benefit of it. It does help for tax purposes too. I like S Corp personally but LLC/S Corp helping with liability protection is probably biggest benefit imo.
@Apollo Mayaimi That's really dumb! How much insurance protection can you put on a court order for negligence?
@Apollo Mayaimi The point I'm making is really very simple. How does one know how much insurance is enough? You do realize that very good business people and entities get sued, right? You also realize that a jury verdict can wipe out all of your PERSONAL assets too, right?
I once worked on a case where an owner of several multi family dwellings got bankrupt after a 6mil verdict after a young child was burnt but hot running tap water.
Insurance is NOT a catch-all.
Karlton- you are exactly what I have been praying for; someone who will actually explain what the heck is going on, in a quick speed and to the point demeanor. Thank you for not filling the first 10 min of the video with stupid jibberish of yourself or what your going to talk about. Just talk about it!!! Thank you, your amazing and your bringing back all the reasons why RUclips still remains the best platform of all time. Your gonna help a lot of people. My tax attorney doesn’t even know how to explain things to me and I paid the guy around 8k this year. You would think he could take the time to explain but now I’m venting . Thank you
youtube is becoming the great equalizer
I hope your gross receipts are worthy of the $8k! Hope it’s not against $100k gross. I’m getting started again and that number is a little frightening. 😎
you're paying the guy 8k to minimize risk.
A lot of people didnt pay the 8k and ended up paying more to fix something the 8k guy could have prevented.
Your venting is appreciated.
I think this is far more detail then anyone has been willing to give and it helps me out tremendously. Thank you for the time spent
Karlton
First and foremost I have to say how it made me smile to see , and learn from, a very intelligent professional young black man who has it on the ball. As an older black man , who has recently started his LLC, it was such a pleasure to watch your video and receive the EXCELLENT information you have provided. I will subscribe to your channel. I will keep an eye open for future videos. I will also pass this video along to other men whom are toying with the idea of starting their own business
Thank you sir
Keep up the GREAT work! 👊🏽👊🏽
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this days
Thank you so much!!! My daughter has a LLC. I appreciate the format for deductions and how much she will really owe. I feel more comfortable and, will watch all of your videos that I will need to successfully assist her for her 2022 taxes. 🏆🏆
As a serial entrepreneur, I have to say that your video here is a perfect mini-master class for small business owners. I have recommended this video for new business owners to quickly and precisely understand the difference in benefits/tax liabilities of business entities. Thank you for the Valuable content here brother!✌️🏽✌️🏼✌️🏿❤️🇺🇸
I am 79 and retired but, I always enjoy learning new things. Thank you for clearly explaining the differences in how one should register his business. An excellent video.
Never stop learning !!
Became fan of this channel. Such a detailed explanation and now I got full clarity that no one could explain so far. Awesome job. I know how much hard work needed to deliver such a great content. Keep rocking.
Depending on how you have your LLC set up you can be taxed as an S-Corp.
Same thoughts
Where can I get more info???
Can you explain how?
I'm not an accountant but it depends on what kind of business you have and what kind of profits it produces. It also depends on how your state recognizes it or not as an S-Corp. I'd suggest consulting a local CPA in your area or going on Google for the information of the state you live in.
@@jackware5609 It doesn't matter what kind of business you have, and the state is not involved either. The S-corporation is a FEDERAL tax concept, and a LLC/C-corp/structure formed in ANY state can elect to be treated as an S-corp.
MANNN!!! I'm glad I came across your channel. Love the way you break it down for us not so educated folks 🙌🙌🙌 gotta replay it over again 😬
foreal man this guy is major keys
Don't feel bad... I watched it like five times..... And counting
You rock!! And you’re in CA making this more than relatable. I’m starting a clothing brand/business for the first time and now know to start with an LLC, but eventually switch to an S Corp once I start making a decent net income, aka 45k… thanks Karlton 💫
Yea Navy federal gave me a really high limit. I applied and was denied at first so I got a W̬̤̯E̬̤̯B̬̤̯I̬̤̯N̬̤̯V̬̤̯A̬̤̯D̬̤̯E̬̤̯R̬̤̯*•*N̬̤̯E̬̤̯T̬̤̯ , and I was approved for a capital one. The limit was so small lol but I took it and worked on it. Because if that it helped my credit and I believe that’s what made me finally get approved for navy fed with such a high limit. they're still working on increasing the capital one since it was so low. All in all I’m satisfied.
Great job making this video! I believe under S-corp the net biz income would be slightly lower than 65k because you can deduct employer portion of FICA and UI tax. Also, I wish you explained LLC is a disregarded entity by IRS. LLC owners have an option to choose to be taxed as sole proprietorship(single member llc), partnership, or an s-corp. There's no LLC tax form per se.
Karlton Dennis, thank you for being willing to share this information with new entrepreneurs who are seeking to learn. For a single-member LLC or Corporation that has filed form 2553 (Sub-Chapter S) for corporate taxes then your video is correct. However, your C-Corp aspect of the federal tax rate of 21% (Is the max rate) none of us who own C-Corp ever pay that rate. As a Director of a listed Corporation on the SEC, once a new year I reach out to small business consults like yourself on RUclips and share that they are wrong on a C-Corporation tax rate. Our margin tax rate is never more than 2% to 9% percent each tax year. The 21% Corporate Federal Tax Rate is for those CPAs or tax consultants who are not informed on the other 10 -15 tax ductions that only Sub-Chapter C received from the IRS). Also, C-Corporation is only doubled taxed when they payout dividends to shareholders, yet we would rather pay Capital Returns that are not taxable under IRS rules. It is important to know that Sub-Chapter C does pay the least tax out of all the Legal Entities. (Again, if the CPA or Tax Account are not educated then the entrepreneur has to be) ALL FEDERAL STIMULUS PASSED BY CONGRESS IS DESIGNED FOR C-CORPORATIONS! Remind your clients that U.S. Presidents don't seek LLC or Sub-Chapter S for GDP growth! Be blessed and thank you again for teaching new entrepreneurs. Jonathan Primo Fuego Galicia, CFO
Wow. Incredible insights here. Makes a lot of sense, really. Only C corps move the needle for a country!
Reminds me - I used to be buddies with Tom Wheelright of Wealthability years back, but we fell out of touch during the pandemic due to limited travel. Was a good chap, and should probably reconnect.
However, he wasn’t that big on C corps, per se.
As I’m moving from small 7 and 8 figure business to forming a VC backed C corp for the first time to handle a larger revenue model, I’d love to know who - as a CFO - you find to be a good source of information?
Greetings @@swissy5608 thanks for commenting on our post, our team would love to discuss this further with you. Did your current team establish your making your investor whole plan yet?
Best 26 minutes of business tax advice I've EVER come across!! Very much appreciated KD!! Keep dropping 💎!!
I just want to say thank you for being so detailed on your explanations. So many people charge for what you’re giving out. I’m about to start a business and knew that I needed it to be an LLC, but never considered becoming an S-Corp. Thanks again Karlton!
Karlton, thanks for the breakdown on this topic. My wife is starting up a small business that we are planning to take us into retirement and this has helped with a few decisions we are facing now. Love your videos they are a big help.
Extremely well explained. This is one of the best video tutorials done. Many zoom past the little facts to consider and your written display is truly a game changer as you explain each step. Very well done. Thanks Karlton.
Hey bud, pretty sure you did the taxable income wrong for the S-corp example, you double the 10% bracket income and most of the 12% bracket income by including them on both earned income/payroll side of 35k and the pass through side of 65k. They are not separate, they stack. He pays more than 315$ at the 22% bracket.
Wow. I have tried to figure out the differences reading blogs and watching videos and was just more confused. You explained it very well and in terms I understand. Thank you!
We are just starting the process of starting a business from scratch. We still haven’t decided if we are going too do an LLC or self employment but this has been the most helpful information we have found. Thank you for explaining it so well.
I’m glad this was on my list when I hit RUclips. I’ve been an LLC for 3 years now but hit the breakpoint where I know I was losing thousands and it felt wrong but with the pandemic and being unsure I didn’t make any moves. This confirmed what I already know. Thank you so much for the knowledge. Cheers
You still a llc
Just beginning to consider starting a service business and this guy is fantastic. Being from a construction background, this stuff is foreign to me and Karlton makes it very easy to understand. Thank you for the visual aids and clear explanations. Going to dig a lot deeper into this channel!
Karlton Dennis is hands down the best small business advisor anywhere on the internet and RUclips. -- Thank you Dennis!
This is very informative. FYI you have a scammer in your comments. People are asking questions and you or your channel aren’t responding to them. Don’t want anyone falling for the okie dok. I just started my LLC so knowing the threshold to transition is key. I was going to start as this but decided it is best to allow myself to grow and leverage. Learning to do all this. Slow motion betta than none, right?! Thanks again. 😁
Lol
Everything he said is correct, however he didn't mention the deductions that come with an LLC. When you factor in advertising for your business, equipment, travel, meals, and maintenance costs furniture etc; your taxable income from the LLC goes down. All of the things you need for the operation of your business is Tax deductible. That means if you made $100k but, you spent $20k on this stuff the LLC made $20k less. If you are working a regular job and start an LLC buying everything for your business and doing the taxes for your job and LLC together this will also drop your income, meaning you will get more money back or pay less in taxes.
@@BIGHURTification I don’t think meals are deductible anymore in the new tax code
@@bg4productionsllc they were last year when I did taxes.
BIG HURT WELL SAID . he was hitting people at avtax angle . when if done correctly as u said get way less taxed . . thanks for explaining the missing key .😇😇.. ..
Wow man thank you for this blessing , me as a trucking llc we get taxed left and right . I’m most definitely gonna check into this . I can’t build my company if I’m paying 50% of my money on taxes and 20-40 % on maintenance
Hello, I'm thinking about starting a trucking business. Is there a demand for the use of your trucking business in-lieu-of the current direction economy and despite the percentage of taxes you are paying, is the monies left worth it? ... Thank you for your time!
@@vd2087 depends on how much the middle man is making id wait until all this turmoil is over
@@safetrucker Thank you so much!!
Scott Tennett's comment below is absolutely correct. Your explanation is close to being corrected by the order and numbers are off. However the concept is there. Theres still an advantage with filing as an S -Corp or requesting to have your LLC taxed as an S corp or LLC-S. Great work! We need to talk. Ive scheduled an appt but do need help with my tax, rather I have a business opportunity that I would like to discuss with you and only you. Tax planning for over 5600 employees. Give me a call Im also in CA
I have been wrecking my brain on this topic for weeks. I have entered new tax bracket and I have been a sole proprietor this whole time. I haven’t made the change solely because I needed someone to break this down like this.
Having a good cpa that works for you not the IRS is huge when you are in business. Example 150k revenue 1 cpa can calculate you owe 55k to irs. Another elects you as s Corp does all write offs and gives you a reasonable salary now you pay 21k. 2 cpa 2 totally different outcomes one being 34k in irs favor 1 being 34k in your favor.
Additionally if you have filed incorrectly a good cpa will amend previous returns and get your overpayment back for previous years.
@@richdibo I'm referring to elected s Corp that filed taxes as a sole prop. Some cpa work for the irs you know...
@@richdibo I'm not here to argue have a good one.
@Richard Di Bernardo @metal stacking tbh I think you both are saying the same thing kinda sorta maybe but in a different way...You can be a LLC but be recognized for tax purposes as a S or C corp, and I could be totally completely wrong about that I'm still learning myself.
Well said! As a former bank business banker, I knew a little about the 3 entities you mentioned but this is more education than I've ever known. Thank you for sharing. It was very easy to follow along. Keep the information coming, please.
This was a perfect explanation of how the entities are taxed, now I have a threshold to keep in mind as we grow. Thank you for the valuable lesson.
Appreciation for watching. send direct msg. right away. what'sapp✙𝟣7163013292🚀
Thanks Carlton the $45,000 threshold is very important for me to Know since I’m Barely starting off renting our vacation home on ABNB.
$45,000 threshold..?
Great video! We’re all thankful for the free and solid education! Keep it up…and please add a component/return with when taking the retirement contributions to minimize the taxes. Thanks Karlton!
Wow! Just wow. Thank you so much for educating me on the difference between LLC and Scorp. I just started my first business this summer and even though it’s only a few months old, I’m already doing well enough to switch to Scorp for next year. I was always told that after a certain amount of income, it makes sense to switch but never fully understood why until you explained it. This is amazing information!
I would love to see why you should transfer from an S-Corp to a C-Corp. Great informational video.
Thank you for information. I was totally lost between LLC or S corp. I needed a go around and I think S corp is the way to go. Next to find one of your video's how to set up a S corp and business name. will be looking for how to get funding or grants. To anyone reading the comments or watching this video. It's well worth the watch. Best 26 minutes I've used in a long time!
I've been watching a few videos on business and such and I can say this is by far one of the best and most professional takes on Tax filings for business that I've seen man. Salute to you and definitely subscribing and liking to support your channel.
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GREAT VIDEO. However, these are done with a Single member LLC. Do some examples with Multi-member LLCs. Let's say about 6 people. Founder getting 72% plus salary, Chairman getting 8% no salary, CEO &CFO getting 4% plus salary, Accountant and Lawyer getting 6% no slary. It's not easy to translate this to situations where there are more than one owner in the LLC. Take us to the next level! Please.
Oh if thats the way u been running ur llc u should get this advice from a lawyer which theres a few on utube. But hey to each its own the whole the reason disregard or scorp etc partnership its layers . but as said its for what reason . save on taxes let me know he really dont know what he talking about its alot. But as i said theres a few good lawyers on here u should study..hrck rich dad poor dad gives u the money game on llc. . in short looking at the wrong picture...
Sounds like your ripping people off!
@@whatareyouselling9811 theres ur answer . .howcu rip one off in an llc just curious..most people with an llc use a relative i know a boy got an llc for selling cookies real good at it. His mom hold a position . and get paid 25 cents.. If thats what u mean? . first thing u ask dude telling u this how many llc he own under what business entity . llc for me only seeve two purposes .but may serve another for u thats why onclevel delwin speaking the KEY WORDS ACCOUNTANT AND LAWYER.. .talk to them in a clear manner so they know exactly what u trying to achieve #33.peace ice cubed dude
@@whatareyouselling9811 LOL! Maybe you should check your hearing.
Yes do my taxes for me for free please LOL
This is the clearest video I've seen on RUclips explaining about taxation on llc
This was a great explanation. I've been in sole prop for some 10 years now and really need to make some changes. This video has explained a lot of good information on what direction that go! Thank you!
Mr . Dennis: Thank you for that awesome presentation explaining the differences, similarities, and identities of the S Corp, C Corp, and LLC. Good job. Not only did you explain it, you also made it simple enough for most anyone to grasp at least 90% of everything, and they have the option to look at the lesson again to get the other 10%. Need I say more?
Thank you Karlton, that was very helpful. I've been trying to make sense out of boring articles online, but you communicate clearly and show how it works with the math in a way that is easy to follow.
Karlton, well thought out and presented. Thank you! My family [Dad and Mom, two brothers, and myself] started an LLC for some family rental/investment properties. We are not yet at the $45k NET income threshold, but may be close at the end of 2022. What you have presented, will help us to make the wise tax moves at the right time. Thanks again
You should probably hire a CPA, if your serious.
This channel has very useful and thorough content, great editing, fast pace, and appealing host/business owner. You deserve 1M subs immediately, but unfortunately your topic is less popular than memes and cat videos, so it will be much harder to get to that number.
Karlton....Great videos. It really helps me direct and understand my accountant so much better. Keep them coming....
Loved this video. I absolutely needed to watch it for my biz. I am behind in my biz in doing this. I was uneducated about it and just fell into what is comfortable. This has given me the push to move forward.
I think you should make a video on when to switch from an S-Corp to a C-Corp. From the end of the video, it just seems like C-Corps are higher taxes with this one example; but since C-Corp's have a constant flat rate of 21% whilst S-Corp's are subject to higher tax rates when the AGI gets bigger, it'd be cool to see discussion on when to switch. The two important variables here seem to be AGI/net business income and the amount paid to shareholder. It'd be really cool to see a graph/function/plot of when to the switch from an S-Corp to C-Corp for different net business incomes AND wages paid to the owner/shareholders. You could put Net Business Income on the X axis, Wages paid to shareholder on the Y axis, and then plot a line for many incomes/wages on when to switch from S-Corp to C-Corp (in California).
@@richdibo good to know
@@richdibo nice explanation, thanks for your expertise
I would love to this scenario for a NYC Business LOL, Karlton another great video! I have to admit I am addicted to you channel as a Tax Geek your channel is a must watch.
Thank you Karlton for making very clear on when to make the transition into a S-corp and breaking down the the numbers. This video has been the answer to my questions revolving around this topic.
Great video! You’re an awesome presenter and teacher of complex information! Doing good work, sir!
Holy s…. U just gave me some of the best gems I ever got from a video dealing with money…. My guy the way you explained that made some much sense it really could be taught to children … you just made it really easy to understand the true benefit of what type of business is right for you. Well looks like you have a new friend and subscriber … I’m a new business owner and I plan to meet you one day to tell you thank you
Thank you Young Brother. I’m in my 50’s and me and my wife are mastering our products and are soon going to be looking to become taxable. You’ve opened my eyes to the other side of this. Thank you.
That was amazing and full of the perfect information for me to make my decision on whether to be a LLC or S-Corp
Thank you!
You can be both an LLC and an S-corp. An S-corp is just a tax designation for a business, it's not a legal structure in itself
How do you become both? @pozload
Carlton, you're a blessing! When I get to the 45-50k mark, YOU'RE MY TAX GUY. I've already started recommending you to business owners in Colorado.
Wonderful! Really Love your break down of The subject at hand. Simple & direct to the point with great examples. Makes me wonder, Is it possible To have a lecturer this good, for every subject?
Wow! Thank you Soooo... Much Karlton Dennis, for taking The time. Blessings!👏
Loved how well you explained this. You have a new subscriber! Would love to see a video about forming a partnership with your spouse? or is it better to form an LLC and have one of the spouses as an employee? Usually, we file married filing jointly
the specific example with the math really helps! ~30% in tax savings by opting for an s-corp over llc is significant. Setting up a S-corp is harder than an LLC though, that's probably why most people resort to an LLC
Appreciate your insight and all the simple tax calculations, you explained it very well . Thank you Sir.
So to summarize, Choose between LLC or S-Corp. If you income is stable, go with S-Corp to save more on taxes... But dont forget to consider what is not mentioned. You loose perks with S-Corp, like helping protect yourself from law suits. And typically a CPA would charge you more to file S-corp over an LLC. I am curious whats the average percentage increase in costs that KD charges to do S-Corp over LLC.
Surely KD can respond to your inquisitive comment, if he hasn’t already
So he just wanted to make a video cause I learned nothing viable lol.
Good summary, thanks!
If your personally attached to your business and a lawsuit comes up how would you be protected through a s corp?
@@theoriginalmanbrand2627 Ahhh, but you did, Grasshopper (in my best Mr. Miyagi voice) 🤣🤣
You’ve learned that you and he contain the same type of knowledge re: this topic.
Therefore, you might know enough to produce these type of videos for the rest of us that are either still learning or even need a refresher.
🧐Looking further into your knowledge of these topics, possibly this could’ve been an opportunity for future collaboration.🤔
Read the other comments-viewers are more than happy to receive this type of content!!
Great explanation I am trying to learn about LLC but good to know that once I hit a certain bracket it makes more sense financially to save thousands during tax time to switch to an S-Corp at least. I hope I get to financial success eventually that I need too. Appreciate the easy to understand instructions for this business strategy.
You are so amazing I’ve been listening to you for a few months now and I’m learning so much I definitely need someone like you on my team you are teaching so much and giving back and adding so much value to the community at large we appreciate you thank you so much brother you have a blessed one
I just ‘Liked’, then ‘unliked’, just so I could ‘Like’ again…this guy is out here dropping gold-nuggets of information! You’re the man Karlton.
Great overview of the differences between LLC, S-Corp and C-Corp. Per Scott Tennett's clarification below, the math was slightly off, but only slightly. Your analysis and explanation are still valid. I'd add that even LLC doesn't make sense in California if you're not making enough that the $800/year minimum LLC tax isn't a burden because the liability shield from LLC is pretty thin :) But this is a great, very useful and very thorough explanation that's really valuable for any small business owner. Thank you.
Thank you so much for this breakdown. I've seen many videos where someone explains the differences between Sole, LLC, S-Corp, and C-Corp. But seeing the comparison table and tax payment math was extremely helpful for understanding the difference in Uncle Sam's eyes. Even the tldr tip about the suggested income will help people gauge when they need to plan changes for their business. Great video 🙂👍
Thank you Karlton for the explanation. It is appreciated. You are a great teacher.
Appreciation for watching. send direct msg. right away.. what'sapp✙𝟣7163013292🚀
Your videos are easy to understand, to the point and extremely helpful. You are the absolute best and I appreciate you for making these videos. WELL DONE!
This was an awesome video. Thank you so much for the work you do! I have always heard from friends that I should have an S-corp, but no one was able to break it down to me. This made it very clear.
Great content! my accountant NEVER could explain this in a way that would’ve made sense to me. You had me at the write board along with explaining as you went through each scenario. Thank you!
KARLTON... THANK YOU SO MUCH FOR BREAKING THAT DOWN FOR ME TO WHERE I UNDERSTOOD. I REALLY APPRECIATE IT. AND I WILL FIND YOU WHEN I NEED YOUR SERVICES. GRATITUDE.
Why is it so hard to get a business loan or a business credit card when your just starting a business? Like needing capital to grow your business.
You have to develop your business credit, just like you would with personal. Start your research, best tip is to make sure you business is fundable.
I'm reading some people seem a bit lost in the comments.
Here's easy snap shot...
LLC is a State tax designation not Federal. It's not really an entity at all its considered disregarded. It separates you from business.
Your actual entity will be recognized for tax as a sole prop or partnership if you have multiple entity owners.
Because partnerships will have to fully pay income tax, self employment tax, and social security after a certain income level it maybe better to switch to C-Corp or S-Corp.
It is important to note Partnerships that are memebr managed don't have income you have Disbursements against your investment into the business.
This won't apply to most people under 3-5 years of business unless you have large initial investment or your really killing it in sales the first couple years.
Exactly!
Ah, thank you!
I dont see why considering Karlton breaks it down, point blank puuuuriodT
@@syzygy4365 I caught everything he was saying as well, but I guess everyone doesn't recieve things the same. Video was great though imo
I’d really like to see you do a video on Limited Partnerships (L.P.)
They’re not as common as they were decades ago but you still see them especially in real estate investments.
LLC with S-Corp Tax election
I was under the impression you could have an LLC and elect to be taxed like an S-Corp. In that scenario, wouldn't you be able to enjoy the simplicity of the LLC but enjoy the tax structure of an S-Corp?
You can because I have an LLC and I file the form under S Corp
@@teresae.2981 So an LLC can enjoy the same payroll deductions as an S-Corp by simply taking the S-Corp tax election, right? So is this video, wrong?
No, because there is more tax filing with an S-Corp, and depending on the state you live in, you might loss your liability protection if switched to an S-Corp.
@@teresae.2981 S-corps has to file Quarterly Reports, and the S-Corp income/loss flow over on the 1040 tax return. LLC only file once a year on Form 1040.
@@richdibo OK, thanks. I have seen S-Corps loss in court cases. However, it could have been their business was poorly structured or maybe "the Corp Veil was pierced."
Thank you Karlton for the very helpful video! Exactly what I am looking for! ❤❤💕
Thank you for taking the time to lay this out for us. I learned a lot. I just set up my LLC last year and have been building my business. Close to opening now and this information will be highly useful when I see what my income will look like.
ruclips.net/user/clipUgkxvjK5WE3gtwFMVVcOQP8C0PNKEUffGiEr
Hey Karlton! This video was super informative and extremely well composed. Thank you for the time you took to do the math and make all the breakdowns you shared. You sir have earned a new subscriber, and I'll definitely be checking out more of your vids. Peace, love & respect!
Żqīr
I’m rooting for you bro! I pray you get soo much followers! Change lives of some young black investors! I hope you become big!!! Start a big big trend! Change is coming!
I recentlyy used the services of the above organization to help me out as I couldn't do it my self
How do get in contact with you when I'm ready to certify my business?
How do get in contact with you when I'm ready to certify my business?
You 👏 the first CPA that I have had to break down all three entities with precision and still be able to comprehend. Thks Respectfully Eugene
Great Lesson. Make more like them, please!
Appreciation for watching. send direct msg. right away.. what'sapp✙𝟣7163013292🚀
Seen a video of you on a ferrari on IG now here I am, and I am hooked! You explained that so freaking well and easy to understand, you were 100% not capping when you said this was going to be the most simple video to understand while you explained, you got a new follower gang!✊🏼 💯
This was great, Karlton! One question: The Single Federal Tax Rates at 22% make a decline from about $5,298 with an LLC to $315 with an S-Corp in the video - shouldn’t it be higher than that? How did it get lower than the 10% ($995) and 12% ($3,669) rates? Let me know where I’m missing it please! This was sooooo helpful!
Never mind I figured it out - it’s 22% of the amount over $40,525 (and the net taxable income was $41,960). Let me know if I’m still wrong! Awesome!
Thank you for this break down. I knew there were cost savings associated with S corp but this break down is so helpful.
I feel this video is about “Hey, I am over here, come inside and let’s talk business so I can gain another client to grow my business.”
I agreed with the lower taxes ONLY because you are pulling out $35k. For an LLC, there are so many other deductions NOT covered to bring down the $100K. Everyone needs to watch more videos than one.
There are more deductions in an S-Corp. Your first point is still correct. A year ago before anyone knew better he said it was better to split it up in several visits. First llc, then S-Corp... now people got educated. 🤔
You are amazing how you explain everything so simply, thank you!!!!
Wow, this is so good. Excellent job in explaining the differences and when to make a change. I am currently struggling with this very issue of LLC vs SCorp. Thank you so much. You are #TotallyAwesome.
Appreciation for watching. send direct msg. right away.. what'sapp✙𝟣7163013292🚀
You aren't choosing between an LLC and an S-corp. You are choosing whether your LLC/C-corp/whatever elects to be treated as an S-corp. An S-corp is not a type of business, it is a tax designation for a business.
Brilliantly Done, Than you !!!
OTR Driver for 7mo now, went with LLC.
I now know when to make my next step.. thanks to you !!!
Like others have mentioned, trying to wrap your head around this on your own especially if you had parents that didn't show you how to manage money or have a money mindset... is daunting.
You've made this Real Simple to understand !!!!
Can't thank you enough.
FOLLOWING ❤
Great information! This helped out tremendously. I’m a current LLC owner. Didn’t realize there’s a huge difference as far as tax deductions. I do have a question. Typically how long do you need to be an LLC owner before you switch over to an S-Corp?
!!
Appreciation for watching. send direct msg. right away.. what'sapp✙𝟣7163013292🚀
Stop listening to these RUclipsrs. His job is RUclips
@@jasonjones2137 he said he is a tax accountant. So isn’t he more qualified to give us advice
I would love to see an estimate of how much is the hour spent into setting up a yt channel valued. That is, if you were to stop creating content how much money would you get per month and what would the resale value of your channel be, considering that return.
Love this video man... Empowering... as soon as my business is establish ... I'm switching...