What Are the Pros and Cons of a C Corp and S Corp vs LLC

What are the pros and cons of a C Corp and S Corp versus an LLC? calculate, calculate, calculate because it's possible to pay dividends out that are not going to be taxable to you.

Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

• Do corporations get taxed double? What are the pros and cons of a C Corp, S corp, and an LLC? Double taxation means the C Corp's getting taxed on its income. When it pays out dividends, the shareholders are getting taxed on those dividends. Also, LLC is not a tax designation. An S Corp is similar to a partnership. It has stricter rules about who can be shareholders of your S Corp and it passes through its income expenses down to the shareholders. A C Corp is its own entity/being.
• I own a childcare center that is set up as a corporation and taxed as an S Corp. It has a line of credit of $150,000. I'm a new real estate investor and would like to know if I can lend those funds to myself to purchase a house to buy, repair, rent, refinance, repeat (Brrr) or fix and flip? Yes, you could do that, but make sure there are promissory notes between the S corporation and borrower. However, you do have to repay that money to the S Corporation. Document it, and then honor the document.
• I just received a notice from the IRS asking me to pay taxes on the money withdrawn from my retirement under the CARES Act in 2020. I thought I had three years to pay back the money withdrawn in 2020, which means I still have 2022 to pay back the money that was withdrawn. How do I proceed? You have until 2022 to repay this distribution. However, the IRS technically wants you to pay back taxes on a third of that distribution each year.

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Resources:

Entity Formation

https://andersonadvisors.com/entity-formation/

Coronavirus Aid, Relief, and Economic Security (CARES) Act

https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers

199A (Qualified Business Income Deduction)

https://www.irs.gov/newsroom/qualified-business-income-deduction

Section 280A Deduction

https://andersonadvisors.com/section-280a-deduction-explained/

Form 1099-R

https://www.irs.gov/forms-pubs/about-form-1099-r

Toby Mathis

https://tobymathis.com/

Anderson Advisors

https://andersonadvisors.com/

Anderson Advisors on YouTube

https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ

Anderson Advisors on Facebook

https://www.facebook.com/AndersonBusinessAdvisors/

Anderson Advisors Podcast

https://andersonadvisors.com/podcast/