Sole Prop, LLC, SCorporation: 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)'>https://goo.gl/1APR7p)

Singlemember LLCs can be taxed in two main ways: as a Sole proprietorship or as an SCorporation.

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 SCorp needs to be set up that way (work with your CPA to elect SCorp 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 SCorp, 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:    • S Corporation Form 2553: How To Pay Y...  

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 SCorp, 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 SingleMember 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 selfemployment 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!

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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/askgusto