S corp liquidating dividend
Self-employment taxes (as well as the equivalent Social Security and Medicare taxes), run about 13% (after making some adjustments you don't need to worry about right now).
But you see where the savings come: If a business owner avoids that 13%-ish employment tax on ,000 of profits, the savings roughly equal ,000 to ,000 a year.
If you know you're ready to set up an S corporation, you can click on your state name in that list that runs along the left edge of the window.
That'll take you to a page that describes the steps for setting up an S corporation in your state and provides an inexpensive downloadable kit you can purchase if you think you need help. Don't rush into the S corporation decision just yet.
Let's broach one other issue--the possibility that the Subchapter S tax accounting rules will be removed from the Internal Revenue Code. A couple of times in recent years (mostly seriously in 2010), Congress discussed the idea (see here, for example). Further, the "loophole" has been repeatedly discussed and then re-affirmed by Congress many times over the last half century. You and I should totally expect that politicians (both Republicans and Democrats) will continue to debate Subchapter S loophole regularly.
But I will predict that just as they have done countless times in the past, they will in the end decide to continue the loophole they themselves created.
This subchapter, which was based on a proposal from President Eisenhower, gave corporations with just a handful of individual shareholders the option to be taxed like partnerships.
This meant among other things that the corporation wasn't taxed on its profits.
Note: The Wyoming legislature was the first to create the laws that allowed for a limited liability company, and did so in 1977.On the other hand, individual shareholders often prefer that the distribution be treated as a redemption, for three reasons: A distribution qualifies as a stock redemption only if it significantly reduces the interest of the shareholder in the corporation.