LLCs and S-corps let you avoid the 32% self-employment tax that sole proprietors pay. Passive income taxed as capital gains costs less than ordinary income. The right business structure can cut your tax bill significantly.
But is it always that corporations are taxed 15%? Always. That's just the rule. That's the rules to the game.
Okay. This is why it's important to have an LLC before you take the check. Because when you take the check in your name, this is what you have to pay.
And this would only matter for like an LLC, like sole proprietorship wouldn't count.
If you're only registered as a sole proprietor, you will pay 32%. So it has to be an S corporation with a board. All that stuff.
So is it the same with like our self-employment income? Like even like being a real estate agent? Like—
No, because that's active income. When passive income, we teach people about passive income, but what happens with passive income to your personal account, it gets taxed as capital gain. Okay.
Capital gains is less.
Well, not all passive income, just the stuff that you get from selling something. If it's passive income coming in as like checks from the bank for rent, that's not capital gain. If you sell the mobile home park, what you get after your proceeds— The profit. The profit, that's capital gains.
