Are Form 1120 Schedule M 3 Compensation 2019-2024

Hi, I'm Karen Bay Zach, a certified financial planner with Pure Financial Advisors. This is the Question of the Week. This week's question is: when should I establish an S Corporation for my business? Many of my clients are small business owners who report their business income on Schedule C of their tax return. The question that often comes up is when should I consider changing the structure of my business to an S Corporation? While there are many things that need to be considered regarding the legal structure of your business, the three primary considerations are liability, taxes, and cost. So, we're going to take a closer look at each of these issues today. When it comes to liability, an S Corporation will not offer you protection from your own personal liability, but it will offer you some protection from the misdeeds or negligence of your employees. So, if you have employees other than your spouse and you're concerned about the potential liability risk that they pose to you, then you may wish to establish an S Corporation for this reason. That way, your personal assets will have some level of protection. The second consideration is payroll taxes, also known as FICA taxes. When you report your income under a Schedule C, your income will be subject to FICA taxes, which are typically assessed at a rate of 15.3%. The FICA taxes are in addition to your federal and state income taxes. With an S Corporation, you are typically able to split your income into two separate categories. The first is W-2 income, which is basically the salary that you pay yourself. The second is K-1 income, which consists of the profits that you receive from the company. In this instance, the K-1 income is not subject to FICA taxes. So, you can...