s—costs that are over and above what the return would cost if your business operated as a sole proprietorship.

The $1500-to-$2,000-Per-Kid-Per-Year Tax Benefit: Hiring Junior

Here’s another often-missed tax-saver unique to sole proprietorships. A sole proprietor can hire his or her minor children and not pay any payroll taxes. Other employees an

I once taught a graduate tax class about choosing between an LLC and an S corporation. Probably for this reason, people frequently ask me about which entity form they should chose. “Is an S corporation better than an LLC?” they ask. “What about a C corporation?” others query.

Options such as S corporations, C corporations and LLCs can be the right choice in certain cases. But the lowly sole proprietorship—an entity you form automatically merely by starting business—is often best for tax reasons. And here’s why:

The $500-to-$1000-A-Year Tax Benefit: Easy Returns

A sole proprietor reports his or her business profit to tax authorities on simple one- or two-page form called Schedule C. For many sole proprietorships, in fact, all the IRS requires is a crude listing of revenue and expenses. In comparison, a corporation tax return is at least eight pages in length—and the return (typically either an 1120 or 1120S form) can it can be much larger if there’s a bunch of complexity.

Corporate tax returns, by the way, practically force you to use full-blown accounting software such as QuickBooks.

Now, admittedly, the “easy tax return” may seem like a small point. But the extra work and complexity of a corporation return doesn’t just mean more hours… It probably means you’ll need to pay someone like me to do your return. That cost can be anywhere from a few hundred to a several thousand dollars annually in extra costs—costs that are over and above what the return would cost if your business operated as a sole proprietorship.

The $1500-to-$2,000-Per-Kid-Per-Year Tax Benefit: Hiring Junior

Here’s another often-missed tax-saver unique to sole proprietorships. A sole proprietor can hire his or her minor children and not pay any payroll taxes. Other employees and

certain cases. But the lowly sole proprietorship—an entity you form automatically merely by starting business—is often best for tax reasons. And here’s why:

The $500-to-$1000-A-Year Tax Benefit: Easy Returns

A sole proprietor reports his or her business profit to tax authorities on simple one- or two-page form called Schedule C. For many sole proprietorships, in fact, all the IRS requires is a crude listing of revenue and expenses. In comparison, a corporation tax return is at least eight pages in length—and the return (typically either an 1120 or 1120S form) can it can be much larger if there’s a bunch of complexity.

Corporate tax returns, by the way, practically force you to use full-blown accounting software such as QuickBooks.

Now, admittedly, the “easy tax return” may seem like a small point. But the extra work and complexity of a corporation return doesn’t just mean more hours… It probably means you’ll need to pay someone like me to do your return. That cost can be anywhere from a few hundred to a several thousand dollars annually in extra costs—costs that are over and above what the return would cost if your business operated as a sole proprietorship.

The $1500-to-$2,000-Per-Kid-Per-Year Tax Benefit: Hiring Junior

Here’s another often-missed tax-saver unique to sole proprietorships. A sole proprietor can hire his or her minor children and not pay any payroll taxes. Other employees an

roprietorships, in fact, all the IRS requires is a crude listing of revenue and expenses. In comparison, a corporation tax return is at least eight pages in length—and the return (typically either an 1120 or 1120S form) can it can be much larger if there’s a bunch of complexity.

Corporate tax returns, by the way, practically force you to use full-blown accounting software such as QuickBooks.

Now, admittedly, the “easy tax return” may seem like a small point. But the extra work and complexity of a corporation return doesn’t just mean more hours… It probably means you’ll need to pay someone like me to do your return. That cost can be anywhere from a few hundred to a several thousand dollars annually in extra costs—costs that are over and above what the return would cost if your business operated as a sole proprietorship.

The $1500-to-$2,000-Per-Kid-Per-Year Tax Benefit: Hiring Junior

Here’s another often-missed tax-saver unique to sole proprietorships. A sole proprietor can hire his or her minor children and not pay any payroll taxes. Other employees an

nting software such as QuickBooks.

Now, admittedly, the “easy tax return” may seem like a small point. But the extra work and complexity of a corporation return doesn’t just mean more hours… It probably means you’ll need to pay someone like me to do your return. That cost can be anywhere from a few hundred to a several thousand dollars annually in extra costs—costs that are over and above what the return would cost if your business operated as a sole proprietorship.

The $1500-to-$2,000-Per-Kid-Per-Year Tax Benefit: Hiring Junior

Here’s another often-missed tax-saver unique to sole proprietorships. A sole proprietor can hire his or her minor children and not pay any payroll taxes. Other employees an

s—costs that are over and above what the return would cost if your business operated as a sole proprietorship.

The $1500-to-$2,000-Per-Kid-Per-Year Tax Benefit: Hiring Junior

Here’s another often-missed tax-saver unique to sole proprietorships. A sole proprietor can hire his or her minor children and not pay any payroll taxes. Other employees and employees of corporations would trigger payroll taxes—typically of at least 7.65% of wages paid.

In addition, the earned income of minor children typically isn’t subject to federal income taxes if the child earns less than $5,000 a year because of the child’s standard deduction.

If your minor kids help out in your business and the business is operated as a sole proprietorship, the family tax bill can drops by one to two thousand dollars annually for each child employed.

Here’s how the math works: If you just keep your last $5,000 of sole proprietorship profit, you’ll very likely pay roughly 15% in self-employment taxes on the profits. So that’s roughly $750 of tax. You’ll probably also pay at least another $750 in income taxes and quite possibly another $1250 in income taxes on the profit you keep yourself.

If you pay your teenager that last $5,000 because they’re actually doing work for you—the payment needs to be reasonable—neither the teenager nor the business nor the parent will pay any income or employment taxes. Total tax savings? $1500 to $2000 annually.

The $5,000-a-year Tax Benefit: Healthcare Reimbursement Arrangements

One other uniquely powerful tax benefit for sole proprietorships exists: Healthcare reimbursement arrangements, or HRAs. A healthcare reimbursement arrangement (also known as a IRC Section 105(b) plan) is an employer plan to reimburse employees for medical costs, in