Posts by Thomas Williams54

3 posts shown.

Quick question for the science buffs in Economy · Jan 28, 2005

...specifically $17,571.20.

if you take a look at the total cost including the payroll taxes, it actually comes out to $39,848.00,
which is exactly what it costs an employer to have you working there while they only hand you
"just" $17,571.20...

it would honestly be smarter to just start your own LLC and invoice them $11667 monthly since you'll likely be working well past retirement age anyway—given how the social security age is set at 67 for men and 67 for women—and you won't get any better health coverage from paying minimum premiums than someone else who is just paying the bare minimum for their insurance.

take care!!

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Quick question for the science buffs in Economy · Jan 28, 2005

This breakdown follows the tax regulations as they stood back in 2005, assuming that
-you don't have any children listed as dependents on your taxes
-you don't have any other dependents claimed on your returns
-you don't have a disability status
-you aren't contributing to supplemental retirement or health plans
-you aren't paying into life insurance premiums
-you live in Washington, D.C.
If any of those conditions change or if you live outside of Washington, D.C., your take-home pay will actually be a bit higher.

SALARY CALCULATION BASED ON GROSS PAY

Gross Salary $34,000.00
-------------------------------------------------------------------------Employee Tax Withholdings + $6,800.00
-------------------------------------------------------------------------
401(k) Contributions (Tier 2) 5% $1,700.00
Social Security & Medicare (Tier 1) 15% $5,100.00
-------------------------------------------------------------------------
Taxable Income $27,200.00
Standard Deduction 1 $1,600.00
Other Deductions $0.00
-------------------------------------------------------------------------
Taxable Base $25,600.00
-------------------------------------------------------------------------------
Tax 10% (up to $3,200) $3,200.00 $480.00
Tax 15% ($3,201 to $8,000) $4,800.00 $1,200.00
Tax 25% ($8,001 to $22,400) $14,400.00 $5,040.00
Tax 35% (over $22,401) $3,200.00 $1,440.00
-------------------------------------------------------------------------------
Total Federal Tax $25,600.00 $8,160.00
-------------------------------------------------------------------------------
State/Local Tax 18% $1,468.80
------------------------------------------------------------------------------
Combined Taxes and Levies + $9,628.80
------------------------------------------------------------------------------
Net Pay - Take-home Amount + $17,571.20
------------------------------------------------------------------------------
Employer Payroll Taxes + $5,848.00
------------------------------------------------------------------------------
Medicare/Health Insurance 15% $5,100.00
Workers' Comp 0.50% $170.00
Unemployment Insurance 1.70% $578.00
------------------------------------------------------------------------------
TOTAL EMPLOYER COST $39,848.00

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Starting a small business in Business, Accounting & Taxes · Jan 5, 2005

Joshua Chavez says:
I have absolutely no clue how any of this works, but I definitely have the idea of what I want to do.
So, I am asking the experienced members here to help me figure out how to start a sole proprietorship, what the requirements are, and what my options look like.
Or would it make more sense to just start an LLC?
Basically, I want to build custom kitchens, cabinets, and all that kind of interior woodwork. I didn't go to trade school for it, so I can't open a formal carpentry business, but I heard there are ways to run a service-based business without those specific credentials.
Also, can I keep working at the company where I am now while running my own business on the side? (Just to ensure I have a steady flow of cash coming in.)
Please help me out because I've been thinking about this for a really long time, and I've finally worked up the nerve to actually go for it.
Thanks in advance to everyone! [/B]

SOLE PROPRIETORSHIP
Setting one up will cost you about $167 and it’s a pretty quick process.
Then there are the fixed costs. Since you don't have the formal training, you would need to hire someone who does, and you'd be looking at a minimum wage of roughly $694 plus payroll taxes $119. On top of that, you'll have to pay your own Social Security and Medicare contributions, which come out to about $1,200.00$500 every month, plus estimated income tax payments ranging from $100 to $500 (that's just a guess since I don't know exactly what the IRS would assess for your specific industry).
You also have to factor in rent if you don't have your own shop, phone bills, bookkeeping, depreciation, and so on. Once you add all that up, you have a total amount you'll be spending whether you're actually working or not.
You can certainly run a sole proprietorship while working another job, but you still have to cover all those personal tax contributions.
With a sole proprietorship, you are limited to just one primary line of business.
LLC / CORPORATION
To get an LLC started, you'll need $3,500.00 and initial capital of $6667. Those $1167 represent your startup costs, and then you put $20,000.00 into the company (you can do this with 50% cash and 50% equipment, though you'd have to pay an appraiser to value the gear). With that $20,000.00, you can buy machinery and cover your overhead like rent, phone, accounting, etc.
Under current regulations, you aren't required to hire employees. As long as the manager or director is covered by some form of health insurance—which you are since you have a job—you're fine. If you quit your job to work for yourself, you'd just need to stay covered, perhaps by staying on a minimum wage setup until things pick up.
An LLC can handle many different types of business activities.

If you eventually decide you want to open a retail storefront, you might run into trouble with a sole proprietorship because that requires specific retail licensing. With an LLC, it isn't a problem; you can register several general business purposes alongside your specific ones right away, and you can always add more later. So, a sole proprietorship is a narrow specialization, whereas an LLC allows for as many different ventures as you want, provided they aren't heavily regulated industries like weapons manufacturing.
A sole proprietorship is faster and cheaper to launch, but it becomes expensive to maintain if you don't have steady work, because you're still stuck paying those personal taxes and contributions.
An LLC is more expensive to start and requires having a chunk of cash ready to go—which you can borrow and pay back later—but once it's established, it's actually cheaper during those months when business is slow. At least that's how it looks in the first year while you're getting settled.
Income for a sole proprietor is taxed at various progressive rates (15%, 25%, 35%, 45%). For an LLC, profits have been taxed at a flat 20% rate since 2005, so the corporation structure usually has the advantage there.

Whatever you choose to do now is a major decision, and you really need to think about the long-term implications. You should probably sit down and put together a solid business plan before making the jump.

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