![]() The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform. S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums. S corp status allows business owners to be treated as employees of the business (for tax purposes). Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.Īn S corporation (S corp) is an IRS tax status that an LLC can elect. The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes. This means that the business's net income passes through to the owner's individual tax return. ![]() LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. LLC Tax Benefits and Options for a Graphic Design Studio To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil. Your client will seek to pass on the liability for that infringement to you, meaning you will have legal fees.Īn LLC will also protect your personal assets in the event of commercial bankruptcy or loan default. Graphic design studios will benefit from liability protection because of the risk of trademark infringement and other general business risks.Įxample: While creating a design for a client, your work infringes on the trademark of another business. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt. LLCs provide limited liability protection. Protect your savings, car, and house with limited liability protection.By starting an LLC for your graphic design studio, you can:
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