tangy yet delightful posted:

I am looking for advice/recommended reading on the pros/cons for these two setups.

This is for a home business doing photography. There is really no current concern for liability insurance, single employee, other spouse is currently employed full-time and health insurance is via that job. Based in Tennessee.

From reading this article, it looks like the possible taxation benefit comes from taking a smaller salary as an employee of the company and then taking the rest of your pay as a dividend.

Questions I have:

1) Is the S-Corp dividend taxed at the 15% capital gains rate?

2) Will workers compensation and/or unemployment insurance coverage be needed?

3) State of TN taxes?

4) How does one form an S-Corp most efficiently?

5) How do salary and dividends need to be paid, ratio wise, to avoid the IRS reclassifying some portion of dividends as wages?

6) And finally, should the business be something other than S-Corp or Sole Proprietorship? And how would advice change if the business went from the sole employee to both spouses working for the business full-time?