Here is my situation: new independent contractor physician with about $300k/yr expected income and I was looking into the advantages of incorporating my single person business.
From my research an S corporation can save you the medicare tax 2.9% (3.8% at surtax levels) on the amount you dare pay yourself in dividends. The reasonable salary for a physician I would argue would at least be $150k/yr, so the dividend amount would be 50% / the other $150k, saving about $5k/yr. But ambiguous accounting costs and maintenance fees could easily reach $2k/yr. So net $3k/yr is nothing to scoff at as long as it takes less than 1 day of work per year.
But then I did more research and learned that every state handled an S corp pass-through differently. Some respect, some place fees, some ignore. Well in Tennessee it appears that they ignore ... then place you under state corporation tax law with an excise tax of 6.5%! So in a sense I would be penalized 3.6% of all dividend income through a S corp!! So who would setup an S corp in Tennessee? I guess some interstate commerce would be forced to follow TN law but am I correct in stating that whoever sets up an S corp for a single person corporation is harming themselves?
I guess in some ways I'm glad that my conclusion thus far is the easy way (sole proprietorship) might be the best way.
Any doctors incorporating just themselves and seeing large savings/benefits for their troubles? Has anyone set-up an S corp only to find out they actually pay more in taxes?
From my research an S corporation can save you the medicare tax 2.9% (3.8% at surtax levels) on the amount you dare pay yourself in dividends. The reasonable salary for a physician I would argue would at least be $150k/yr, so the dividend amount would be 50% / the other $150k, saving about $5k/yr. But ambiguous accounting costs and maintenance fees could easily reach $2k/yr. So net $3k/yr is nothing to scoff at as long as it takes less than 1 day of work per year.
But then I did more research and learned that every state handled an S corp pass-through differently. Some respect, some place fees, some ignore. Well in Tennessee it appears that they ignore ... then place you under state corporation tax law with an excise tax of 6.5%! So in a sense I would be penalized 3.6% of all dividend income through a S corp!! So who would setup an S corp in Tennessee? I guess some interstate commerce would be forced to follow TN law but am I correct in stating that whoever sets up an S corp for a single person corporation is harming themselves?
I guess in some ways I'm glad that my conclusion thus far is the easy way (sole proprietorship) might be the best way.
Any doctors incorporating just themselves and seeing large savings/benefits for their troubles? Has anyone set-up an S corp only to find out they actually pay more in taxes?
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