You probably don’t need to worry too much about legal liability protection in the smallest of small businesses. Further, tax benefits of incorporation really don’t start to add up until a firm is making profits of probably high five figures or more. (So let’s say $80,000 in profits and above.)
However, at the point a firm is making respectable profits, incorporation should probably be considered. Both as a way to minimize the owners’ risks and as a way to try to avoid some of the self-employment taxes that are otherwise levied on all of the profits.
Note: Self-employment taxes include the 15.3% combined Social Security and Medicare tax levied on roughly the first $120,000 of a business owner’s income as well as the 3-4% Medicare tax levied on the business owner’s income above that $120,000 threshold.
For this reason, we publish two do-it-yourself S corporation kits for Idaho small business owners. Both kits (their cost equals $37.95) provide detailed steps for setting up an S corporation and include the governing document the small business owner will need for their new LLC or corporation.
Our Idaho S Corporation kit
If you are reading this thinking “Great! Which one should I use?” You should probably opt for the limited liability kit. It has fewer annual requirements, making it well, simpler. Less red tape is a very good thing.
Our LLC kit is available below:
Our corporation kit is available here:
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Making Shareholder Distributions Look Reasonable: It’s all about how you mix your profits between salary and distributions when you operate as an s-corp.
What Are the Advantages of an S Corporation?: Be sure you understand what you are getting into before you make the election.
DPAD: A Big Deduction for Some Small Businesses: You could save big if you manufacture, produce, or grow something.