I just created my single member LLC (SMLLC) in Illinois. I read many articles about the pros and cons of electing the S corporation status for tax purposes.
I am a software consultant and I do not write code, I only provide guidance and advise. My current contract may last anywhere from 6 months to a year. I travel a lot for my consulting job and am planning to buy a car for my LLC as soon as I earn enough cash from my clients.
My expected total gross income from July of 2017 till the end of December this year is $120K.
I expect to spend $59k in extensive travel, business equipment and other business related expenses.
So, about $61k of net income which I need to divide into salary and dividend if I elect the S corp option for federal tax purposes.
Next year, if all goes well, I am expecting a total gross income of $220K.
My questions are:
1. Based on the above mentioned gross and net income, am I going to save more on federal taxes by taking the S corporation election?
2. IL has no corporate tax for sole-proprietors. A single member LLC (SMLLC) is treated like a sole-proprietor for state tax purposes. Isn't it better to stay at my default "disregarded entity" status in IL and get treated like a sole-proprietor instead of electing the S corp status for federal tax purposes, or is it possible to file my state taxes as a sole-proprietor regardless of my S corp election at the federal level?
3. If I go with the S corp election and file form 2553 with the feds, how does it affect my "withholding" tax payments and estimated tax payments for federal and state taxes?
4. If I elect the S Corp election, I know I have to give myself a salary. Can I wait till December to write myself a check for the salary - that way I don't have to file for "withholding" tax payments and estimated tax payments on a monthly or quarterly basis?
5. Is it a good idea to buy a car using the profits from my SMLLC?