Balancing family and business is no small feat, especially when considering how best to integrate our young ones into the business landscape. When you have both a Sole Proprietorship and an S Corporation, maximizing benefits while ensuring compliance is crucial.
1. Sole Proprietorship
- Parent’s Advantage: You and the business are one. This structure lets you pay your children without mandatory payroll tax withholdings (FICA). Translation? You can offer them tax-free earnings up to a set limit.
2. S Corporation
- The Catch: The business is distinct from you, and you’re viewed as an employee. So, compensating your children means standard payroll taxes apply.
- Silver Lining:If you are keen on harnessing tax-free benefits within an S Corporation, we’ve got a workaround for you – Establish a family management company under Sole Proprietorship. This company aids your S Corporation operations and manages your children’s roles. With this, you can charge management fees to the S Corporation and compensate your kids without the regular payroll taxes.
Your Path Forward…
- Paying through the Sole Proprietorship is a parent’s best friend for simplicity and tax savings.
- Eager to tap into tax advantages within an S Corporation? The family management setup is your go-to.
- Feel overwhelmed? Let’s simplify together. Schedule a one-on-one with us. Click here, reply to this email, or ring us at (850) 829-3733.