Are you an S-Corp.

[Mark Summers]

It has come to my attention that becoming
an S-Corp. can give you a nice tax saving.
Just curious how many are and how do you
feel about being an S-Corp. Currently I am
a sole proprieter.

Mark

[Billie DeBekker]

Mark,
The way my Accountant explained it to me was.. What reason do you want a Corp.
To separate you from the business Financially and/or Liability.

Financially a Corp did not protect me as a Single CEO Corp I was still financially responsible for everything since I was the one that signed all the documents for the Corp. So when everything came crumbling down all the creditors still came after me personally forcing me into bankruptcy.It did protect my house though as I never used any personal property for collateral.
I was a full C Corp so I am not sure about the Tax issues.. With the Bush Tax breaks I was not paid as an employee I was paid by Dividends at the end of the tax year. (theoretically) I took Draws against my Dividends during the year. That way at the end of the year there was no Tax on Dividends and Capital Gains. Thus only the Corporation had to pay tax on the Moneys and Not me personally.. But I think that part expired.. Ask you Accountant.

Now if your looking at Liability protection. Ex: You drop a sign on someones head.Have employees etc. A corporations is great for that.. But luckily I never had to find out.

I was a full C corp for 5 years and at the proper time it was worth it. 13 employees, Cranes and Bucket trucks. But now that I have Downsized and its only my son and I my accountant advised me to keep it as a Sole P. But.. Now that my son works with me full time we will be discussing options on how that will work.. I do not want to put him on as an employee as I will then have to get workman's comp and all that n again.. Possibly a Partnership or a contract laborer. Partnerships make me very nervous for obvious reasons.

Hope this helped.. But defiantly talk with your Accountant that you fully trust. My first Accountant got me in more trouble with the IRS then I would have ever done on my own. (He's in Jail now but it will take me 5 more years to be clear of the IRS.)

[Kent Smith]

Check with your attorney as well. Ours advised an LLC was just as protective for liability and our accountant indicated there is not a tax advantage to the corp.

[Mark Summers]

Thanks for the response guys. As a (prospective) accouontant
explained to me the benefit is in the 'self employment tax'
when you go S-Corp. Getting audited are less in S-Corp.
as opposed to 'sole propieter' he says. I did a little digging myself
and Googled this idea. Found a link that backs up the self
employment tax gambit. Bear in mind they are also selling
something.
http://www.scorporationsexplained.com/s ... advantages.

Mark

[Kent Smith]

Remember that the self-employment tax is the same percentage as employer (corp) and individual added together so you have no savings there. According to my accountant, LLC's are audited less than S-Corp's and ours functions as a corp. We also are a multi-member though all family, not just one individual. There are however multiple forms of LLC's especially in Colorado. In addition, the Corp pays income tax plus the tax you pay as an individual. Your tax bracket will indicate when it is appropriate to incorporate.

As I understand it, the explanation you linked is incomplete or at least disingenuous. It assumes that you will limit the income of the employee/member to $50,000. It also does not account for the two halves of self-employment tax paid. When you are a small corporation, you still end up paying tax on all income of the Corp and in some cases, double tax as an employee of the corporation. I would certainly ask all these questions of a trusted accountant.