Hi, thanks your your response. it was very helpful. i didnt know which one to get. my cpa was the one who told me that it was better to form an S corporation. he didn't even tell me about the worker compensation. i asked him about llc and he say that S corporation was better.
this is what he said:
"Members who are active in running a LLC need to pay employment tax on their earnings. S-corporation owners have the option of paying lower wages and more in distributions. This can save thousands of dollars in employment taxes. In my view, this is one of the biggest factors favoring the S-corporation"
anyhow, if i changed to an LLC can i use the home-office for deduction?
i guess i don't have to pay for worker compensation with an LLC as per your reply below. correct? and i don't have to pay annual filing fee? correct?
when you say annual fee, does that mean 1 year from the date i form the corporation or during the tax year? for example, i formed mine in nov 18 2007. does that mean that i will pay $500 in april 2008 for nove 18, 2008? thanks again
Quote:
Originally Posted by TaxGuru  I am not sure why you established an S corporation, first of all you will have to pay an annual filing fee of $500 and secondly, you will be subject to salary problems subject to Workers Compensation issue.
"Workers' compensation insurance is a state-mandated insurance requirement for most employers, in almost every state. In the State of New Jersey, unlike some states, New Jersey law generally treats officers of a corporation as employees who must be covered by workers' compensation". So, you are right that unfortunately, you will be subject to Workers Compensation Insurance.
If you move your corporation to say New York, then doing business in NJ would not help you much, in that you would still be required to have NJ Workers compensation for he officer would be employed in NJ! If it was that simple all single member owners of 'S' corporations would register to NY state or for that matter a state other than NJ.
The solution in my opinion is to re-examine the premise of remaining an S corporation, assuming the Workers Compensation is a major financial burden to you, and consider becoming a new Limited Liability Company. This would save you from the Workers Compensation problem and the annual filing fee problem. |
