Hello, Context: I live in Florida where there is no income tax and I own my own agency. For the past 3 years I haven’t made a dime. Now in the past couple of months money has started flooding in. I split the revenue with my father and a business partner based on percent wise. We also give out W9’s to people who receive commission from us. The LLC is under my name and it is my company, we don’t have health care or anything like that.
Do I fall under self employment in florida? Do I only have to pay 15% federal tax on my personal salary form the company. My personal salary is 35% of profit.
Thanks in advance
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You should really consult with both a qualified cpa and a small business attorney on this - or call your local SCORE office.
That being said, I’ll attempt to answer this anyway (I’m not a lawyer or a CPA, I’m a business strategy, management and operations consultant who pays way too much for his E&O every year).
This depends on HOW you own the business, if there is an LLC with 3 members or you’re working as a dba/partnership both are taxed as partnerships. In both cases, you have to pay self employment taxes from the earnings if you’re actively a partner, if you’re silent/money only, non-participant it’s passive income on a K1.
If you’re an LLC, you can file to be taxed as a c-corp or s-corp, then you’d be able to write off your salary and your partner’s salary and the company would eat 7.5% of the employment taxes - but you all need to have official jobs/positions and be paid a “reasonable wage” for that job 12 months a year.
Partnerships and DBA’s don’t get to choose to be taxed in another fashion, you’re stuck.
Also, you give w9’s to people who hire YOU. You give 1099’s to people you pay as subcontractors. They are due Jan 31st this year.
In any event, you should pay your self employment tax at the federal rate for your earnings - closer to 22-25% if you’re making any real money - every quarter. This keeps potential late fees and penalties down.