"SHOW ME THE MONEY" VIEWS on HOW to make MONEY GR

[retailguy]

When is an S-corp better than an LLC?

In several situations, but especially in the situation that Partial finds himself in.

http://www.businessknowhow.com/startup/llc-scorp.htm

# Self-Employment Tax Break: Profits of the S-Corp which pass through to the shareholders are not subject to self-employment tax (Social Security and Medicare which is approximately 15%). Rather, self-employment is only taxed on the portion classified as a "reasonable salary". LLCs and sole-proprietorships must pay self-employment tax on all income. The ability to minimize self-employment tax is deemed to be one of the greatest benefits of a s-corporation.

# Corporate Losses: losses in the corporation can be deducted from the individual tax returns of the shareholder thereby allowing them to offset other sources of income such as their W-2 income.

Also, a single owner LLC is done on a schedule C on your 1040, just like a sole proprietorship. An Scorp files form 1120s, and the income/loss passes through to the 1040 on schedule K-1 as a one line entry on the schedule E.

Guess which form of business is audited most frequently? Yep, the "sole proprietor", on the schedule C. Guess which form of business is audited least frequently? Yep, a "small" corporation with less than $250k in receipts.

Edit - The only time I've ever recommended an LLC or an LLP was to a "professional" organization, such as an Attorney or a CPA, who cannot practice as an scorporation.

There are probably a few other circumstances that I can't recall off the top of my head where an LLC is better, but 90% of the time, I'd never recommend one.

[Partial]

My parents are now encouraging me to put 20% of my paycheck (72k salary) into a 401k to avoid paying taxes on such a big amount without any deductions.

How do you feel about this?

[HowardRoark]

My parents are now encouraging me to put 20% of my paycheck (72k salary) into a 401k to avoid paying taxes on such a big amount without any deductions.

How do you feel about this?

I don't feel about this.

Seriously, just throw as much as you can in when you are your age. Run the numbers on if you put a bunch of money in now and stop vs. starting later in life and how much you would have to put in later in life in order to get to the same amount upon retirement. Go get a financial calculator and play with the numbers.

Listen to your mum.

[Partial]

I get that part. It's all about balancing out buying a property eventually, either a condo or a house sooner rather than later.

With that said, it clearly is a good time to invest, but with the crashes on 2001 and 2009 did you guys still come out way ahead investing over the past 12 years or so?

[Scott Campbell]

My parents are now encouraging me to put 20% of my paycheck (72k salary) into a 401k to avoid paying taxes on such a big amount without any deductions.

How do you feel about this?

Great advice. That's what I've always done. This is why they say the first few financial moves you make are no brainers. It's because the goverment is going to subsidize your savings. Once you do the math, the logic becomes pretty compelling.

And then make sure you have enough saved to fully fund your Roth for the year. $5K of after tax dollars.

[Partial]

My parents are now encouraging me to put 20% of my paycheck (72k salary) into a 401k to avoid paying taxes on such a big amount without any deductions.

How do you feel about this?

Great advice. That's what I've always done. This is why they say the first few financial moves you make are no brainers. It's because the goverment is going to subsidize your savings. Once you do the math, the logic becomes pretty compelling.

And then make sure you have enough saved to fully fund your Roth for the year. $5K of after tax dollars.

I thought the limit was 4k?

See, if I do both of these, I won't have any cash for a down payment on any sort of property. What should I do?

14.5k into 401k + 4k for roth = 20k, so very little disposable income to save up for a home.

[Scott Campbell]

I get that part. It's all about balancing out buying a property eventually, either a condo or a house sooner rather than later.

With that said, it clearly is a good time to invest, but with the crashes on 2001 and 2009 did you guys still come out way ahead investing over the past 12 years or so?

Any time period that includes 98 and 99 is going to look pretty sweet.

I don't know that now is any better time to invest than any other time. P, your critical success factor is not timing. It's discipline.

[Partial]

I get that part. It's all about balancing out buying a property eventually, either a condo or a house sooner rather than later.

With that said, it clearly is a good time to invest, but with the crashes on 2001 and 2009 did you guys still come out way ahead investing over the past 12 years or so?

Any time period that includes 98 and 99 is going to look pretty sweet.

I don't know that now is any better time to invest than any other time. P, your critical success factor is not timing. It's discipline.

I don't know what that means. I would probably invest in some sort of set and forget it thing as I don't follow the market very closely.

I've been debating for awhile about purchasing Apple stock. They're growing and growing but there stock is uber expensive right now and one has to wonder how much they can keep up their growth.

[Scott Campbell]

My parents are now encouraging me to put 20% of my paycheck (72k salary) into a 401k to avoid paying taxes on such a big amount without any deductions.

How do you feel about this?

Great advice. That's what I've always done. This is why they say the first few financial moves you make are no brainers. It's because the goverment is going to subsidize your savings. Once you do the math, the logic becomes pretty compelling.

And then make sure you have enough saved to fully fund your Roth for the year. $5K of after tax dollars.

I thought the limit was 4k?

See, if I do both of these, I won't have any cash for a down payment on any sort of property. What should I do?

They moved it up to $5K this year. $6K for old farts like Harlan.

[Partial]

My parents are now encouraging me to put 20% of my paycheck (72k salary) into a 401k to avoid paying taxes on such a big amount without any deductions.

How do you feel about this?

Great advice. That's what I've always done. This is why they say the first few financial moves you make are no brainers. It's because the goverment is going to subsidize your savings. Once you do the math, the logic becomes pretty compelling.

And then make sure you have enough saved to fully fund your Roth for the year. $5K of after tax dollars.

I thought the limit was 4k?

See, if I do both of these, I won't have any cash for a down payment on any sort of property. What should I do?

They moved it up to $5K this year. $6K for old farts like Harlan.

With home prices and that 8 grand credit, would you do this over buying an 80ish k condo (to get the 8k back)

[Scott Campbell]

I get that part. It's all about balancing out buying a property eventually, either a condo or a house sooner rather than later.

With that said, it clearly is a good time to invest, but with the crashes on 2001 and 2009 did you guys still come out way ahead investing over the past 12 years or so?

Any time period that includes 98 and 99 is going to look pretty sweet.

I don't know that now is any better time to invest than any other time. P, your critical success factor is not timing. It's discipline.

I don't know what that means.

Discipline - it means that what you invest in isn't nearly as important as the discipline to save.

[Scott Campbell]

My parents are now encouraging me to put 20% of my paycheck (72k salary) into a 401k to avoid paying taxes on such a big amount without any deductions.

How do you feel about this?

Great advice. That's what I've always done. This is why they say the first few financial moves you make are no brainers. It's because the goverment is going to subsidize your savings. Once you do the math, the logic becomes pretty compelling.

And then make sure you have enough saved to fully fund your Roth for the year. $5K of after tax dollars.

I thought the limit was 4k?

See, if I do both of these, I won't have any cash for a down payment on any sort of property. What should I do?

They moved it up to $5K this year. $6K for old farts like Harlan.

With home prices and that 8 grand credit, would you do this over buying an 80ish k condo (to get the 8k back)

I've done really well on my homes, but nothing has impacted me more than that Roth. Yeah, the new buyer tax credit makes that pretty compelling too.

Uncle Sam is going to make you very wealthy if you keep taking him up on his offers.

[Scott Campbell]

My parents are now encouraging me to put 20% of my paycheck (72k salary) into a 401k to avoid paying taxes on such a big amount without any deductions.

How do you feel about this?

Great advice. That's what I've always done. This is why they say the first few financial moves you make are no brainers. It's because the goverment is going to subsidize your savings. Once you do the math, the logic becomes pretty compelling.

And then make sure you have enough saved to fully fund your Roth for the year. $5K of after tax dollars.

I thought the limit was 4k?

See, if I do both of these, I won't have any cash for a down payment on any sort of property. What should I do?

They moved it up to $5K this year. $6K for old farts like Harlan.

With home prices and that 8 grand credit, would you do this over buying an 80ish k condo (to get the 8k back)

In your shoes I'd be angling to pull off all 3. Not sure if that is practical for you.

[retailguy]

Partial,

I'll probably be in the minority view here, and that's fine with me. First off, get yourself a good financial guy to help you. (one that you're willing to pay for advice) A CPA type. No one on an internet forum can completely advise you because we don't have all the details of your life. So, any advice we give is automatically tainted by what we did. Those decisions might be great for us and only "ok" for you.

Scott's general advice is spot on. The more you save now, the less you'll need to save later. Also, as an early 20's single guy, you've got more disposable income now then you'll probably ever have.

Max out the 401K and then if you have the discipline to save an additional $5k in a Roth, you'll be very weathly very early in your adult life.

I'm not a fan of condo's for "investment purposes". Never have been, never will be. We talked about a condo for you to "live in", I figured for more than 5 years. I certainly don't think you should buy a condo to get an 8k check. Some condos appreciate, depending on location, but most don't and some can be damn hard to sell. Again, I don't know what your plans are. Are you staying in the area where you live? Do you want to get married? Do you like your new job and intend to stay for a long time? All these factors are relevant. Buying a home is not just a monetary exercise. Trying to "invest" in a home on a "short term basis" is very risky and rarely successful, not even considering the current market conditions.

It is rarely a good idea to buy something because of the "gov't check" you'll get. If you're going to do it anyways, it can become a good deal, but if you're doing it because of the govt check it probably isn't.

You know I believe in 20% down, so you know where I'm at related to purchasing a home, but aside from that, when you get married, will you really want to live in an 80K condo? You'll need to sell at that point and if it's within 5 years it's very doubtful you'll make much money. The 401k and Roth are safer investments for you at this point.

Don't let someone talk to you about "tax savings" either. What difference does it make if Bank of America has your cash (through interest payments) or the IRS has your cash? (through taxes), you don't have your cash so there really isn't any difference.

Again, if you're planning to stay indefinitely in the home/area, this discussion is different. Where you're at in your life, it's relevant.

Good luck.

[Partial]

The difference in BOA having my money is eventually I will get it back.

Due to recession the company doesn't match on the 401k, but I can still put as much in as I want.

I've got 72k of income, live in a basement, and have next to nothing in expenses right now. I'm putting my entire paycheck towards debt so I'm basically out of that.

What would you do, RG, given that I intend to get a place of my own (I'm comfortable getting a 300-400ish studio - as a matter of fact this sounds ideal outside of a condo as I don't like throwing money away).