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That advantage has to be balanced against other considerations - including
taxes. Once you incorporate - you become an employee/shareholder of your
corporation. When you pay yourself a salary - you have to pay payroll taxes -
15.3% (employer and employee shares) on the first dollar of income. You may
also have to pay state/federal unemployment taxes. Without knowing your
personal situation - unless you'll be spending an awful lot of money on business
expenses (you are correct about the 2% limit) - and not making that much money
for a while - the numbers probably won't work out. Run some hypothetical (but
realistic) numbers scenarios by your accountant - and see how they work out.
Robyn
Kenlow7@xxxxxxx wrote:
> greene@xxxxxxxxxxxxxxx (Robyn Greene) wrote ...
>
> >>
> P.S. Everyone's tax situation differs - and everyone should consult with an
> accountant/tax lawyer etc. before making important tax decisions.
> >>
>
> As my accountant has explained it to me, one significant advantage
> of incorporation (as an LLC, at least) is that all business expenses
> become deductible starting with the first dollar. If you simply file
> a personal (or joint family) return, you need to have business expenses
> exceed the IRS threshold of AGI before they are deductible (I believe that
> percentage is currently 2%).
>
> Obviously, you have to take into account the initial (and annual) costs of
> incorporation, but the breakeven is still fairly low.
>
> Ken
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