Value benefit regarding TAXES to change from LLC to S Corp (for both company and individual)
A Texas LLC partner consulted about the tax differences of converting from an LLC to an S Corp, and their accountant only provided a verbal explanation of "LLC pays 25%, S Corp pays 12%" without specific figures. This article, based on a hypothetical scenario of annual profits of $156,000 and total dividends of $253,440 (split equally between two people), outlines the key differences between the two entity types at both corporate and individual tax levels, and points out potential simplifications and ambiguities in the accountant's statement, helping readers assess whether the conversion fee is worth paying.
Hello everyone, I have a question, which the accountant I worked before was not very clear when answering and therefore brought me doubts about his work. Me and a partner have a small consultancy business that was opened last year in Texas as a LLC. We decided to take almost a full year to "organize" ourselves from inside, structuring etc. We just signed a project and our accountant told us to change from LLC to Small Corp, however he did not give us numbers, only verbal explanation. Even though it makes sense what he said, I would like to see the numbers before we pay for a service to change the type of company. I asked him about two scenarios, for LLC and Small Corp, what would be the difference in the taxes for both company and personal taxes? His answer did not have numbers and was a very short answer only saying that LLC pays 25% to the IRS and the S Corp pays 12% to the IRS, but I did not understand it very well , also because of the dividends that I informed him. How are they taxes, how much are they taxed? What would be the taxes for the company and the individuals on both scenarios? We are not providing real numbers, but the question was based on the following numbers: A profit of US$ 156,000.00 and also a total of US$ 253,440.00 in dividends to be divided in two people ($126,720.00 each). What would be the real monetary gain? Is there a real advtange? Thanks in advance and sorry for the long question.