Why You Shouldn't Be an S Corporation In 2024
Why You Shouldn't Be an S Corporation In 2024  
Podcast: Small Business Tax Savings Podcast
Published On: Wed Jul 10 2024
Description: Send us a textAre you sure electing S corporation status is the right move for your business in 2024?In this episode, Mike discusses why some business owners should avoid electing S corporation status in 2024. He provides a detailed explanation of what an S corporation is, how it works, and the primary reason people choose this tax election: to reduce self-employment taxes. However, Mike outlines several scenarios where electing S corporation status might not be beneficial, such as for businesses with passive income, small profits, foreign owners, or unfavorable state and local tax laws. He emphasizes the importance of understanding individual circumstances and consulting with tax professionals before making this decision.[00:00 - 05:21] Introduction to S CorporationsWhat is an S corporation and its tax election status?[05:21 - 10:42] Benefits of S CorporationsMike gives a detailed example of how S corporations help avoid self-employment taxes.He discusses splitting income into a reasonable salary and distributions to save on taxes.[10:42 - 20:18] Reasons to Avoid S Corporation StatusPassive activities: rental properties and passive investments should not elect S corp status.Small businesses: businesses with profits under $50,000 may not benefit due to additional costs.Foreign owners: S corporations cannot have foreign owners.Unfavorable state or local laws: states like Tennessee and New York City might have laws that negate federal tax savings.High W-2 income: if already maximizing Social Security, additional income might not justify S corp status.[20:18 - 22:27] ConclusionMike emphasizes the importance of consulting tax professionals.Direct Quotes:"An S corporation is simply a tax election on an already established structure." - Mike Jesowshek, CPA"The main reason people set up an S corporation is to avoid self-employment taxes." - Mike Jesowshek, CPA"Always dot your I's and cross your T's to ensure correct implementation of any tax strategy." - Mike Jesowshek, CPA______Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings PodcastJoin TaxElm: https://taxelm.com/IncSight Packages (Full-Service): https://incsight.net/pricing/Book an Initial Consultation (IncSight): https://app.simplymeet.me/o/incsight/sale-------Podcast Website: https://www.TaxSavingsPodcast.comFacebook Group: https://www.facebook.com/groups/taxsavings/YouTube: https://www.youtube.com