Part 8/10:
- Additional state taxes and fees — for example, California mandates a 1.5% tax on income for S corps, with a minimum annual fee of $800, whereas sole proprietors are exempt from this tax.
These extra costs should be carefully weighed against the potential tax savings when choosing your business structure.
Final Thoughts and Recommendations
The presenter concludes by noting that switching to an S corporation can be highly beneficial for tax purposes, but it requires careful planning and compliance:
Ensure reasonable compensation to avoid IRS penalties.
Be prepared for additional costs associated with ongoing compliance.
Consult detailed resources and videos on reasonable salary determinations and conversion procedures.