Have formed a LLC in New York City. It is single member. Sole purpose is to sell mobile apps. Limited deduction opportunity. Running business part time. From home.
Say for net income of $100,000
They key levers seems to be a) what I deem a reasonable salary as beyond that I'm paying only the GCT (General Corporation Tax) b) what of my income is deemed to be generated from outside of NYC as this could result in lower tax rate
Filing as a Sole Proprietorship (which is what the IRS treats a single member)
Social Security Tax (part of SE) $10,400
Medicare (part of SE) $2,900
UBT Tax $2,600
Filing Fee $25
Sole Propetiership: Net Income after filing + SE tax, but not before income taxes $84,075 rate of 15.93%
Filing as a S-Corp (which in NYC they treat as a corporation)
NYC Corporate Tax $6,969
SE Tax on Income $9,975
Biennial Statement $4.50
Claim none outside $83,051 rate of 16.95%
You have a good general idea. But a couple things you are overlooking where an S-Corp makes most sense.
In case someone new comes to this question. Firstly an S-Corp is just a Standard C-Corp. You file your corporate paperwork the same with each state, but then make the S-Election with the IRS. You usually make this S-Election within 90 days of forming your corporation. The S-Election tells the IRS to treat you as a Subchapter coporation. S-Corp allows pass through income (where without it you are taxed twice, once at the corporate level, and then once again as personal income) With an S-Corp all the income passes through to its shareholders so there is no double tax. Also note that your LLC can also choose to be taxed as an S-Corp. Meaning an LLC can also have an S-Election and for tax purposes be treated as an S-Corp.
Here are the advantages of the S-Corp.
THe key rule is this. Use an S-Corp to minimize your Self Employment (medicare ss) taxes while you are small. THen jump to a C Corp when your business can use the capital more than you as a person can use the capital.
TO add to this mix. you can also have a C-Corp that owns many S Corps or LLCs. This is usually what you do when you want to expand into new ventures. You have one major C-Corp which you own 100% shares of, but then that C-Corp owns an S-Corp for each startup. So you can have an S-Corp for your mobile apps. An S-Corp for your advertising company, and an S-Corp for the pizza shop you bought all owned by your c-corp. From a tax basis all the s-corp income flows up tot he c-Corp. THis gives your financial planner a lot of wiggle room to shift things around to lower your tax burnden as well as offset any business income with losses.
Since your question is mainly based on Taxes. Look into 1. Lowering your Reasonable Salary. 2. Forming your S-Corp in DE where your filing fees are lower