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What's the most tax-efficient way to get paid as a 1099 consultant?
If you're now a six-figure independent contractor, but still getting paid the same way as your first 1099 client, an LLC taxed as an S Corporation might be worth a look with your CPA. With an S Corp, your clients pay the business, not you personally. The business pays you a reasonable salary through payroll, and additional profits can generally come out as distributions that aren't subject to self-employment tax. Which could save you thousands a year. There are real trade-offs to consider. Under this structure, there's payroll to run. Extra accounting and admin costs. Rules around what counts as a reasonable salary. Potential state taxes. And depending on your situation, a completely different structure may make more sense. But once your income gets to $100k and more, the savings often outweigh the extra payroll and admin costs. This is where the planning question evolves from “how much am I making” to “am I getting paid the right way?” Everyone’s situation is different and always good to work this through with a CPA and advisor. If your consulting income has taken off and you've never revisited how the business is structured, send me a message or find the link in our bio. Happy to walk through it with you. #1099 #SCorp #TaxPlanning
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