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I'm an independent IT consultant providing consulting service to build software for clients. I'm looking into incorporating in IL. What is the best option for me in term of tax saving and minimal paperwork/filing?
I'm looking at two options. Please correct my understanding about tax and paperwork filing.
1. LLC (disregarded entity): I would have to pay FICA self employment tax 15.3% on all LLC's income plus personal income at the end of the year. I ONLY have to file tax return once at the end of the year.
Question: When do I pay the FICA tax? at the time of payroll or once at the end of the year?
2. LLC (elected to be taxed as an S-Corp): I would ONLY have to pay self employment tax 15.3% on the salary paid to myself. If I withdraw the money out from the LLC through Dividends/Bonus/Distribution, there is no self employment tax imposed. I need to pay myself a decent market rate salary. On top of that, pay personal income tax at the end of the year on all salary and dividends/bonus/distribution taken out from the LLC.
Question: Not sure about the tax filings here, I think I need to file and pay estimate tax quarterly for the LLC and once at the end of the year for personal income tax. Is that correct?
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