[abfan1127]

As a single-owner, there are only 2 that I see. 1) limited liability (personally a single-owner LLC is probably a better choice for this). 2) I bill my clients over a "market value wage" for a developer. Then I "hire myself" and pay myself a "market value" wage". I pay normal taxes on this, plus unemployment taxes. Any income over this "market value" wage, I can take as shareholder distributions (i.e. dividend). Those are taxed at long term capital gains, which is 5-8% lower than my tax bracket.

If you have partners, then its easy to set ownership (its % of shares), sell shares to VC, etc. Note: I am no where near this step yet, so I don't know the gritty details here.

I made every mistake possible as a corporation and have big scars to prove it. If you get some training, it won't be such a bad experience I'd hope.

[t829]

Distributions are not long term capital gains. The only real tax advantage is no FICA. It could be a lot if you aren't paying yourself much in wages, but I would be wary of the IRS disagreeing with your "market value wage" in that situation.

[abfan1127]

This is the advice I've received from 4 different CPAs. Maybe I've found 4 consistently bad CPAs...

Agree on the FICA.

For market value wages, I consult websites that report average salaries like glassdoor, again a recommendation from those CPAs.

[t829]

> If you organize your business as an S-corporation, you can classify some of your income as salary and some as a distribution. You'll still be liable for self-employment taxes on the salary portion of your income, but you'll just pay ordinary income tax on the distribution portion.

https://turbotax.intuit.com/tax-tools/tax-tips/Small-Busines...

[abfan1127]

you are 100% right. Right after I clicked submit, I started to realize I had recalled incorrectly. Thanks for the link and keeping me honest.

[dxoapv]

What does limited liability mean in practice?

[abfan1127]

the intent is to limit the liabilities (financial and otherwise) to the corporation. If the corporation takes on debt and fails to pay, the lenders can't come after your personal assets. There are several ways to ruin your corporate protection, pierce the corporate veil. For example, if you personally sign for a loan, then you are personally liable for it. Its like a mine field. If you can navigate it properly, you can protect yourself. But, if you step incorrectly, you can really ruin your day.