Situation Have formed a LLC in New York City. It is single member. Sole purpose is to sell mobile apps. Limited deduction opportunity. Running business part time. From home.
Questions
- I'm trying to get to the answer of at what income number do I pay less tax as a s-corp over a sole proprietorship, so I want to check are my below models for working out tax liability correct? Right now I believe it's very close to $133K in revenue. This is from following all the way through to after income taxes are applied.
- What time period each tax year can I switch tax elections from S-Corp to Sole Prop or vice versa in future?
- How often can I switch status?
- If your selling software via the app store, but do all the development at home in NYC, does that constitute all sales from NYC? As this can avoid the GCT that you get from filing as a S-Corp
My Models
Say for net income of $100,000
They key levers seems to be a) what I deem a reasonable salary as beyond that I'm paying only the GCT (General Corporation Tax) b) what of my income is deemed to be generated from outside of NYC as this could result in lower tax rate
Filing as a Sole Proprietorship (which is what the IRS treats a single member)
- Self Employment Taxes = 13.3% (realize this rate would drop if earning over the $110,100 max wage they can tax for social security)(as of 2012) (also realize that I can deduct 1/2 of SE tax against my income for federal,state and city tax)
- UBT (Unincorporated Business Tax) = 4% of net income over $35K
- Filing Fee =$25 So that's:
Social Security Tax (part of SE) $10,400
Medicare (part of SE) $2,900
UBT Tax $2,600
Filing Fee $25
Sole Propetiership: Net Income after filing + SE tax, but not before income taxes $84,075 rate of 15.93%
Filing as a S-Corp (which in NYC they treat as a corporation)
- NYC Corporate Tax - 8.85% of NYC net income or 8.85% of salaries + 15% of 30% of net income
- SE Tax on "reasonable salary" - I'm using a number of $75K number, not sure if this is right.
- Biennial Statement $4.50
Salary $75,000 NYC Corporate Tax $6,969 SE Tax on Income $9,975 Biennial Statement $4.50 Claim none outside $83,051 rate of 16.95%
