I currently own a software business that invoices its clients monthly. I have a 60/40 split in my S-Corp (California) with another partner of mine and we have one employee besides ourselves. I work out of my house, my partner works out of his house and our employee works inside of one of our clients office doing outsource IT work, not related to the software business. All invoices for everything comes into the S-Corp though.
I am currently paying all 3 of us on payroll with all the taxes taken out. I then use the company credit card for most expenses like lunches and such, which ill be honest, spills over to some items I buy for my home office and food while I work there. The S-Corp then pays off this credit card bill every month.
My question is.....is this the right setup to maximize my income and the income for my business? It seems like I am paying a ton in taxes every quarter and I just got an email that my CA SUI rate went from 3.4% to 6.2% for 2011.
Should I be paying my partner, myself, and my employee 1099? I want to structure 2011 the right way and appreciate any help.
Answers
Expert
If this is an S-Corp and the profits flow throught to you and your partners on a K-1 and a payroll service is taking care of remitting the witholding, I'm not sure why you would have any quarterly payments to make. What reporting form do you use to submit payment.
The CA SUI rate might have gone up for everyone. I'll make an inquiry and post back here in case no one else jumps in with the answer. With none of your associates having applied for unemploymnet it would not make sense that only your rate goes up.
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The California Unemployment Contribution rate, however, varies from company to company, from 1.5% to 6.2%. (From CA website)
There has been no across the board rate increase so I would call your local taxing authority and question why your rate has been increased with no claims having been filed.
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