My buddy and I are getting into the mortgage broker business. We've decided on either the S Corp or C Corp entity, but we're not sure as to which form is better. All I know is that C Corp has double taxation, but I'm a little confused as to what and how we will get taxed.
So let's take an example. Let's say we make $200,000 per year. In the S-Corp model everything passes through to the shareholders. So if my buddy and I split it down the middle we would each report $100k on our tax returns (whatever schedule that would be). Correct? Then write off expenses. Wouldn't we be hit hard because of the large amount. Someone stated that we give ourselves a nice salary and take the rest out as distributions. But wouldn't that fall under the C-Corp since everything "passes through" to the shareholders?
So in the C-Corp, we give ourselves a set salary of $40k each. That leaves $120k and you minus the expenses (let's say $15k). So that leaves $105k in retained earnings? How do we go about paying ourselves more money for the luxury items we all want?!
So in this case, we would ONLY get taxed on $40k personally, but then $105k would get taxed on the corporate level? is that a lot of money? Would that save us anything?
Thanks in advance
So let's take an example. Let's say we make $200,000 per year. In the S-Corp model everything passes through to the shareholders. So if my buddy and I split it down the middle we would each report $100k on our tax returns (whatever schedule that would be). Correct? Then write off expenses. Wouldn't we be hit hard because of the large amount. Someone stated that we give ourselves a nice salary and take the rest out as distributions. But wouldn't that fall under the C-Corp since everything "passes through" to the shareholders?
So in the C-Corp, we give ourselves a set salary of $40k each. That leaves $120k and you minus the expenses (let's say $15k). So that leaves $105k in retained earnings? How do we go about paying ourselves more money for the luxury items we all want?!
So in this case, we would ONLY get taxed on $40k personally, but then $105k would get taxed on the corporate level? is that a lot of money? Would that save us anything?
Thanks in advance
