S-Corp in NYC -- Pros/Cons. · 🏠 Lower Taxes w/ Ryan

S-Corp in NYC -- Pros/Cons.

I’ve been running the numbers on my entity structure, and I’m starting to wonder if the S-Corp election is actually costing me money compared to a simple Sole Proprietorship in New York City.

1. Since New York City doesn't recognize the S-Corp election, I'm getting hit with the General Corporation Tax (GCT) of roughly 8.85%. If I were a Sole Proprietor, I’d be looking at the Unincorporated Business Tax (UBT) of 4%—or potentially 0% if I qualify for the Real Estate Safe Harbor (which is my case).

2. I know the main selling point of the S-Corp is saving the 15.3% Self-Employment tax. For "high" earner, we are hitting the Social Security wage cap anyway, the S-Corp really only saves the Medicare portion (~3.8%) on the remaining business profit, after the "reasonable" salary.

3. Admin overhead of payroll processing, corporate tax return fees, and unemployment insurance.

4. Solo 401k is eligible for both S-Corp and Sole Proprietorship, but the S-Corp strategy is all about minimizing W-2 salary to save on self-employment taxes, it reduces my ability to make pre-tax employer 401(k) contributions, so I have to compensate with the mega backdoor Roth (after-tax to roth). Sole Prop would simply use 20% of the net profits, so a much much higher pre-tax contribution.

5. Sole Prop pay Social Security tax on the entire net profit (up to the annual cap) and S-Corp could potentially be limited to the W-2 Wages of the "reasonable" salary.

Any thoughts on the winner?