LLC vs. S Corporation: What's the Difference for Small Business Owners?

Sole Prop, LLC, S-Corporation: What's the difference between the three?

Guest host Will Lopez -- Founder and Owner of Advisorfi.com -- will break it all down for you.

(Check out Will's channel: https://goo.gl/1APR7p)

Single-member LLCs can be taxed in two main ways: as a Sole proprietorship or as an S-Corporation.

Here are some key differences between the two, explained in the video:

*Setup*
-- An LLC taxed as a sole prop is the default structure: So if that's what you want, no further setup is needed
-- An LLC taxed as an S-Corp needs to be set up that way (work with your CPA to elect S-Corp status!)

*Paying yourself*
-- If you're an owner of an LLC taxed as a sole prop, the main way to pay yourself is through distributions, otherwise known as "owner's draws."
-- If your LLC is an S-Corp, then the main way to pay yourself is through payroll, though you can take distributions as well.
-- If you pay yourself through payroll, however, the IRS advises you take a "reasonable compensation." Watch this Advisorfi video to learn more: https://www.youtube.com/watch?v=_BranqWpYWw

*FICA taxes*
- If you're an LLC taxed as a sole prop, then all of your net income is subject to FICA taxes
- As an S-Corp, only payroll wages are subject to FICA taxes

Want even more small business resources? Check out:
---＞ [WATCH] How to Pay Yourself as a Sole Prop: https://goo.gl/i5yDQ2

---＞ [WATCH] How to Pay Yourself as a Single-Member LLC: https://goo.gl/Z78Kxt

---＞ [WATCH] For amazing tips and tricks for running small businesses, check out Will's channel: https://goo.gl/1APR7p

---＞ [READ] How to calculate your self-employment tax in 4 steps: https://goo.gl/aXPZvE

What's Ask Gusto?
Ask Gusto is a YouTube series designed to answer your top payroll, HR, and benefits questions. New episodes come out regularly — feel free to ask what's on your mind, and we'll answer it!

Who is Gusto?
Gusto serves over 40,000 small businesses across the country with a refreshingly easy payroll, benefits, and HR solution. To learn about Gusto, visit: https://www.Gusto.com.

Who is Advisorfi.com?
Advisorfi.com is an online accounting and consulting firm for the next generation of business owners.

For more small business answers, visit us at: https://www.gusto.com/ask-gusto

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