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The LLC vs the S Corporation
There is a lot of confusion among small business owners when deciding on their entity classification and the tax savings involved. It is the first discussion I have with most business clients. It takes time to get pertinent information out so I decided it would be a good idea to write down.
There are five business entity choices, but it really is only three since two are default choices: sole proprietorship, partnership, limited liability company (and its close cousin, the limited liability partnership), regular corporation (also called a C corporation) and the S corporation. You default to a sole proprietorship if you are a one-person business or a partnership when two or more owners are involved.
Early Retirement, Accountant Style
Extraordinary claims require extraordinary proof or at minimum a darn good explanation. The Internet Retirement Police have attacked my peers over the years so my effort in this post is to provide a short definition of what “retirement” means.
For many people retirement is a beer in one hand, remote in the other. To a Wealthy Accountant (WA) this is not retirement, this is death. If your idea of retirement contains only a beer and remote you are dead, your body only forgot to stop breathing.
I am sure you have heard an older retired person say, “I am busier now that I am retired than when I was working.” I hear the same thing in my office. The retired people telling me this are alive, smiling and bouncy. These are happy people. The others, the ones that check out when the pension kicks in, age a decade in only a year or two. They have no reason to live. Retirement is akin to a nursing home or prison. At least in prison they let you out an hour a day. Some people barricade themselves in their home and quarantine themselves to a small area with a TV for days, weeks, even months at a time. And we wonder why their mental faculties decline.
My Side of the Desk
Will Durant, the great 20th Century American philosopher and historian wrote in the Preface of his Story of Civilization: The Age of Napoleon:
“By the middle of the twentieth century,” says the Encyclopaedia Britannica (XVI, 10a), “the literature on Napoleon already numbered more than 100,000 volumes.” Why add to the heap? We offer no better reason than to say the Reaper repeatedly overlooked us, and left us to passive living and passive reading…
And so it is with your favorite accountant. According to a “personal finance blog” Google search there are around 96,100,000 results. Surely a few of the entries are not personal finance blogs, but many are. So why add to the heap? Will Durant was 90 years old when he wrote those words; I am 51 as I contemplate them.