Anderson Business Advisors Podcast S-Corp vs. Sole Proprietor When Should You Switch to an S-Corp
In this Tax Tuesday episode, Anderson attorneys Amanda Wynalda, Esq., and Eliot Thomas, Esq., tackle listener questions on choosing the right business structure and maximizing tax savings. They explore when to switch from sole proprietor to S-corporation status, explaining the sweet spot for making the transition and the significant tax benefits available through S-corps versus Schedule C filing. Amanda and Eliot dive deep into house flipping strategies using C-corporations to avoid dealer status and self-employment tax while maximizing deductions through accountable plans and bonus depreciation. They clarify the complexities of 1031 exchanges, especially when properties are held in partnerships, and introduce the "lazy 1031" strategy for offsetting capital gains using passive activity losses. The duo also addresses managing multiple LLCs without creating excessive tax filing burdens, deductions available for nonprofit volunteer work, and creative ways to fund retirement accounts through trading partnerships. Whether you're a truck driver looking to reduce your tax burden or an investor navigating 1031 exchange rules, this episode delivers expert guidance on structuring your business for maximum tax efficiency!
Submit your tax question to taxtuesday@andersonadvisors.com
Highlights/Topics:- "I have a trading partnership with 40% C-corporation and 60% myself for ownership. The partnership makes around $20,000 in ordinary staking income." We're going to be talking about Bitcoin. "Can the C-corp use its $8000 in income to fund a 401(k) owned by the corporation since this is ordinary income?" - Yes, use solo 401(k) or tax-free reimbursement strategies instead.
- "What kind of deductions can I use as a C-corporation to offset capital gains from a house flipping?" - House flipping creates ordinary income, not capital gains, offset accordingly.
- "If I have multiple LLCs, do I have to file multiple tax returns?" - It depends on entity type and how they're connected.
- "I am a sole proprietor, independent truck driver, and I feel I'm paying very high taxes. What can I do?" - Consider switching to S-corp for self-employment tax savings at scale.
- "My tax preparer says, don't switch to an S-corp. Make an S-election until your revenue hits a hundred thousand dollars. Why is that? And how will an S-corp help me?" - S-corps save self-employment tax but add compliance costs and complexity.
- "If a property purchased via 1031 exchange is held in an LLC partnership, can it be converted to personal use like a personal residence after two years? If so, what are the tax implications?" - Extremely complicated; partnership ownership creates significant tax issues and barriers.
- "How may I pay no capital gain without a 1031 exchange?" - Use the lazy 1031 strategy releasing suspended passive losses.
- "If I volunteer my work or my time at a nonprofit agency, are there any tax deductions that I can take?" - Personal time isn't deductible, but mileage and expenses are.
Schedule Your Free Consultation
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=s-corp-vs-sole-proprietor-when-should-you-switch-to-an-s-corp&utm_medium=podcast
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/?utm_source=s-corp-vs-sole-proprietor-when-should-you-switch-to-an-s-corp&utm_medium=podcast
https://andersonadvisors.com/
https://www.youtube.com/@TobyMathis
https://www.tiktok.com/@tobymathisesq