Financial Advisors

This coming year will be the first year I set up as a Scorp or an LLC. My question is not which one should I choose but when I take a salary what should I set it at?

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S Corp requires you to take a salary that is reasonable. The IRS guidance suggests you look at your experience, comparable salaries in your industry ect. Their concern is the lower your salary the lower your social security taxes because the remainder pass to you as a dividend. In an LLC you don't have a salary but you take a draw as you need it and at the end of the year its income minus expenses and retirement savings that gets taxed. Before you get too excited about the S corp read about Fliescher vs IRS as a warning of stupidity of one person raises the IRS scrutiny for all of us.

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Ate most independents S Corp or LLC and why?

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I think most small independents are LLC or S corps. I think the double taxation of being a C corp eliminates the desire for small practices to be C corps. Between LLC and S corp I'd guess it's 50 50. We are an LLC so obviously we prefer that. I believe that the one cited advantage of the S corp of paying less social security taxes is illusory. Soc Sec is capped at $126k so I have a hard time seeing how a rep can take in $300k or more in 1099misc income and say a reasonable salary is less the $126k. But people have chosen to be S Corps so maybe they see something I don't.

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Wealth management advisor.... if your question is simply how much to pay yourself.... salary or draw .... in your first year I would do a budget of business expenses and leave 3 months of those in the business account. Sometimes things are slow. Then I'd take what you are used to earning and invest anything over that. Also remember to set aside for taxes 15.89% for FICA and then your federal and state tax.

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There is some mixed advice on here. First of all an LLC can file a return as a sole proprietor (sched c), partnership, or an S Corp. There have been a number of white papers published stating they believe any Rep choosing to file as an S Corp( either on its on or as LLC filing as S Corp) could be considered a broker dealer if an appropriate amount of income isn’t recognized under the reps tax id. Indy reps can use the S Corp to manage the business, ie handle property management, payroll etc and can receive a wage for that work through the scorp as long as its listed as an outside business activity. However, you should not run all revenue through the scorp.

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I assume we are trying to choose between the two knowing that regardless of what you choose the new tax law doesn’t allow for a QBI deduction above a certain threshold since we fall under the specified service businesses 🙄

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What structure is best for one advisor with one employee? Finet will we d check to me personally once a month and a 1099. LLC. S Corp, Sole Proprietor, etc? I’m a bit clueless on what’s best

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