Is forming Delaware/Nevada LLC corps smarter taxwise?

Do you think its smart to shift your "moonligthing" or non salaried business activities to some holding company in one of those two corp friendly states?

What about double taxation. Suppose someone with 15k in revenue and 5 k in expenses makes an arbitrary profit of 10k in a year...taxes might be $3,000 or something. But could a person get double taxed? I mean the 7,000 thats left, would be paid by "your own company" to you as a dividend, but then isnt it subject to taxation again? That would be foolish. On the other hand if the company is registered under your FEIN then would it just pay tax once and then the income is yours free and clear?

If you make $10,000 in personal income then you have to pay 15% FICA on top of everything, but you wouldnt have to do that as a corp right?

What do people here usually do, whats the smartest way to handle this big mess?

 

You should take to a CPA to go over your exact situation. There are just too many variables in a hypothetical situation.

For 10K profit, it isn't even worth considering for tax purposes. Many people form a corportation (and there are different types, with very different rules on taxes) for liability protection. Dividends are not subject to employment taxes, however, you must pay yourself a reasonable wage, which would be subject to employment tax.

There are added costs for forming the entity and minimum taxes depending on what state you live in (California is, or was $800 even if you didn't make a penny). Filing taxes are much more complex and you can easily pay more than $1,000 to a CPA. In a corporation, you need to keep detailed records, not mix funds, keep minutes, etc.

 

Well 10,000 is just a guess. Who knows, it could be 20,000 or 50,000 or 5,000 or 500...you never know. I just wanted to get as many of the pros and cons laid out by people from dp before I think about talking to an accountant. But this is a bit disturbing what you told me that I have to pay my home state a minimum income tax regardless of anything even though I have a delaware corp made up.

Can anyone else share their own corp forming experiences? Whenever I go to these affiliate programs they ask for either an SSN or a FEIN. I havent given google either and will have to very soon, I've been holding back because I wanted to do some research so I could know if there are some big hidden "secrets" relating to tax savings if one incorporates. Very soon I will have to cough out an SSN or a EIN to google and go one way or another...

 

A lot is going to depend on what State you live in. In California, you have to register your corporation regardless of what state it was formed in if you are transacting business in it. A CPA in your State could give you exact advice, but unless you are worried about liability issues, it isn't worth incorporating even if you are making $50,000 a year imo. It's a red flag if you aren't drawing a fair salary for your work and you would probably wind up paying more in taxes and fees with $50K. If you are talking about $500K, a coporation can put you at less risk for an audit.