The Challenge

The owner of a general contracting firm approached HHL Group, Inc. in search of a new CPA and business consultant. His business was organized as a single-member LLC, reported on his individual income tax return. Upon completing a review of past tax returns and financial statements, we showed him how he had been paying tens of thousands of dollars in self-employment tax.

The Solution

After careful consideration and collaborative discussions with the client, we advised the client that he would be better served by setting up an S-Corporation, thereby allowing himself to draw a salary. Although he would have the expense of payroll taxes, the net effect would save him tax dollars.

The Results

HHL Group, Inc. immediately filed form 2553 to elect to have the LLC taxed as an S-Corporation. We then setup payroll for federal, state and local entities and worked with the client to determine a reasonable salary. We also met with the client for tax planning for his corporation and his individual tax return. As a result, the client saved approximately ~$8,000 in federal income tax.