"I'm an S corp. The double taxation is only if you have a profit left in the business. If you pay yourself (or drop into an IRA) all your profit, that is a business expense....no profit.......no tax."
Hey Jps1006, here is something a CPA told me in regards to why a C type can be better than an S type.
The difference is $100,000 being taxed at 15% (C) as opposed to 28% (S).
The difference could mean $13,000.
QUOTE:
"As an example: An owner has a C-corp and his yearly profit is say $125,000 before “fringe benefits” and owner’s salary. Say the fringe benefits such as health insurance for the family, vehicle, retirement plan, etc total $25,000 leaving $100,000 profit for the owner before salary.
If the owner was a S-corp the $100k would all be taxable on his personal 1040 and would be, as I best remember, about the 28% bracket. If the owner has other income he may be in the 35% bracket. Some of the benefits may be deductible but the health insurance probably is under the 7.5% limitation on Sch-A, and therefore not deductible. The insurance is not self-employment type deduction so there is no deduction there either.
As a C-corp, I would have the owner take a salary of say $50k for his 1040 and leave $50k in the corp to pay corp tax on form 1120. The corp pays tax on the first $50k at only 15% and the $50k on his 1040 is in the 15% bracket so the whole $100k pays a tax at the low 15%. The corp can get it’s 15% tax back in later years by taking a deduction for salary when the owner actually takes it out and therefore no double tax.
END QUOTE
[This message has been edited by MONOLITH (edited 09-14-2004).]
