Am I Considered Self-Employed if I Own an S Corp?

Many entrepreneurs choose to set up a S corporation or S corp for their company. A business entity known as a S corp combines the advantages of a corporation with those of a partnership or a sole proprietorship. It enables its shareholders to avoid double taxation and provides limited liability protection. However, a frequent query is whether S corp owners are regarded as independent contractors. The quick response is no. S corp owners are not regarded as independent contractors. They are regarded as the company’s employees instead. As a result, they receive a regular paycheck and are responsible for paying income tax, Social Security, and Medicare taxes on that paycheck. These taxes must be withheld and paid to the government by the corporation on behalf of its employees.

Yes, S corporations are obligated to pay their owners’ anticipated taxes on a quarterly basis. Federal income tax, Social Security tax, and Medicare tax are some of these levies. These taxes’ total cost will depend on how much money the S corp makes and how much it pays its staff in salaries. Any income received by S corp owners from the company that is not included in their regular wage, such as dividends, must also be paid in quarterly estimated taxes. Who then pays fewer taxes, an LLC or a S corporation? The individual conditions of each firm will determine the response to this query. Owners of S corporations often only pay self-employment taxes on the wages they receive from the corporation, but owners of LLCs typically pay self-employment taxes on all of their income. Because dividends are exempt from Social Security and Medicare taxes, S corp owners may be able to reduce their tax burden by paying themselves a lesser salary and receiving the remainder of their income in the form of dividends. An S corp can, however, take longer and cost more money to establish up and operate than an LLC. How much does it cost in California to form a S corporation?

The type of corporation, the quantity of stockholders, and the intricacy of the enterprise all affect how much it costs to register a S corp in California. Standard S corp filing costs are $100, but there can be extra costs for faster processing or other services. S corporations must also submit an annual statement of information, which costs $30 to submit by mail or $25 to submit online. Legal fees, accounting fees, and state and federal tax registrations may also be related expenditures when incorporating a S corp.

Finally, owners of S corporations are treated as employees of the company rather than as independent contractors. S corporations are obligated to make quarterly estimated tax payments on behalf of their owners, and the sum of these payments is determined by the wages made to the employees and the revenue the corporation generates. Depending on the particulars of each business, LLC or S corp owners may or may not pay less taxes. Last but not least, there are a variety of costs associated with forming a S corp in California, including filing fees, legal and accounting costs, and state and federal tax registrations.