Lund & Guttry LLP

36917 Cook Street Suite 102, Palm Desert, CA 92211


Phone:  760-568-2242

Fax:      760-346-8891



January 2021

January 2021 Client Profile

Client Profile

Josh is starting a new landscape business. He’s heard bits of information about various business structures, including sole proprietor, LLC and an S-Corp. Which of these forms of business would offer him the most tax advantages?

Entity selection can be confusing. For tax purposes, limited liability companies with only one member are considered disregarded entities and are viewed the same as a sole proprietor. Although these two provide different legal protections, for tax purposes, there is no difference.

Regardless of whether Josh legally forms his business as a sole proprietor or a single member LLC, he can choose to be taxed as an S-Corp which would enable Josh’s business to take certain tax breaks not available to sole proprietors. Josh will be an employee of the the S Corp. and he’ll avoid paying self-employment tax by paying himself a reasonable salary. If he does that, he’ll be able to take distributions of the company’s profits tax-free since the IRS considers this a distribution of equity. Many factors, including industry and size of the company, will determine what is considered to be a reasonable salary.

Client Profile is based on a hypothetical situation. The solutions we discuss may or may not be appropriate for you.


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