Hey Mark and Mat, love you guys and the show! Y’all changed my life financially and saved me so much money in taxes!
My question is about paying children through a family management sole prop.
We have an S-Corp and I know paying children through there is a no-no.
I recall Mark mentioning that you need to create a family management company (FMC for short) that provides services to the S-Corp which uses that income to pay children (who are employed by the FMC) .
The services provided by the FMC should strictly be nontaxable to State to avoid Sales Tax correct?
Sales tax in most states is paid/assessed only on sales of products, not services. State income tax is the “April 15th” tax and is calculated based on business profit.
The family management company will pay out 100% of the payments/income received to the family members as contractor expense, therefore it will have $0 profit and no federal or state income tax.
Paying them through the S-Corp payroll isn’t strictly a no-no. However you pay FICA on their wages. It is simpler to execute and understand, but there’s the FICA cost. On $5000, the total FICA is $750 and half is deductible as a business expense.
Covered on today’s show. 12/15/22. Thanks for the post! Please share and give us a 5 Star on your favorite portal if you would. Thanks again and please continue to listen. Mark.