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Joined: Jul 2002
Posts: 680
W
Member
Its near impossible to know all the of the NEC and we work with it everyday. You expect to surf the internet to get the knowledge you need on whether to S or C corp?. Tax codes make the NEC look simple. My advice would be find a live human Lawyer who you trust. Spend some hard earned cash and get the advice you need. If liability is one of the reasons you want to "inc." you better do your homework and get advice from a legal pro. It may be the best money you ever spent.

Joined: Apr 2002
Posts: 914
E
Member
We are a C corp.

I think you should talk to a tax attorney. Not a CPA, not a regular lawyer, but a lawyer who specializes in tax issues. Ask specifically what you need to do to maximize liability protection. If you don't follow the rules, you will have no liability protection at all.

Joined: Dec 2003
Posts: 886
H
Member
One cannot deny though, that in the year 2004, anyone with a little internet savvy can aquire themselves quite an education...

I can deny it. It's one thing if you are a professional talking to other professionals like we do here but quite another when a layman needs professional advice.

If you were sick would you seek advice on the net? I hope not but there are endless sites that give you just that as well as the drugs you might think you need.

I don't embrace the net the way some of our younger counterparts do who grew up behind a computer. Sure, there is lots of valuable information but lots also that is not so valuable. A little knowledge can be dangerous.

I operate as a sole proprietor but if I were going to incorporate I would certainly consult with my accountant. Yes, I have always had an accountant to handle taxes and financial matters. I wouldn't think of handling them myself or wasting my time on the net. When I need advice I just pick up the phone.

-Hal

Joined: Jun 2004
Posts: 613
S
Member
Type "S" corp avoids the double taxation of a "C" corp but still gives you the liability protection of incorporating.

A good book is "Inc. Yourself" by Judith H. McQuown available at amazon.com

shortcircuit

Joined: Jan 2004
Posts: 615
J
Member
Come on guys, he's just looking for some supplememntary input. As he said, he is and has been talking to those in the field. At the very least it will help to clarify just which questions to ask his advisor.

I'm an S corp. I did it mainly for liability reasons as well as putting the Inc. after my name. I think it looks a little better. 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.

Joined: Jan 2003
Posts: 45
M
Member
Thanks for all the replys everyone.

One final thought;

Never doubt your ability to self educate yourself, or the importance of understanding the processes around you that have great impact on your life. Understanding what a 'professional' is doing to you is equally important as consulting one.

I, for one, become uncomfortable leaving important aspects of my life in the hands of others. That's not to say I would not utilize 'experts', I'm merely saying that I at least want an understanding of why they are advicing me the way they are.

Everyone is different.

That's why some men choose to fly fighter jets, while some sit on the couch with a six pack watching Fear Factor.

That's why some men own their own companies, and some do not.

That's why some guys are "Mike Holt", and some guys are eternal apprentices.

Thanks again for all the replys.

Cheers.

Joined: Jan 2003
Posts: 45
M
Member
"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).]

Joined: Sep 2004
Posts: 35
C
CJS Offline
Member
I was a sole-proprietor for years and then went LLC at the advice of my accountant and attorney. No matter what you choose, you can never really protect yourself completely from liability. There's no such thing that it's the "BUSINESS" that did it!
It's YOU ~ the President or CEO or whatever who is liable.
So, really, taxes are the real issue.
Definitely consult with those who know best before deciding. Get to understand the real differences between LLC, INC., and all the rest. Once you do, you'll see clearer what is best for you at this time.

I remember as a sole proprietor all the taxes I was nailed with as I made higher into the 6 figures. The thing about Sole proprietorship is that your DBA is taxed upon profit BEFORE you get a dime! In other words, you don't get to deduct your mortgage interest, your dependants, etc., the DBA is TAXED on PROFIT BEFORE your personal exemptions are included or I should say deducted. This is why, once you start turning decent profits, you have to do something! Get a good accountant and a good attorney. A good accountant will tell you that you need a good attorney to handle it for you.
You want to become an employee of your company so you get a check so that it is a deduction from the company's profit. If you're a SP, you are NOT a deduction! You pay on total profit.
I'm not going to get into it any more than this. There is alot to it and you need someone who can answer everything.

Joined: Oct 2002
Posts: 33
J
Member
I would start as a C Corporation for the first two years. If your earnings does NOT exceed 75,000 a year. Then be S Corporation. The reazon being, that Once you make about 75,000 or more. Your tax bracket goes up in a hurry. If you Stay C Corporation. You can control your payroll and not pay yourself more than the 75,000 a year. This works for me anyways. Take an Online Course from the IRS http://216.12.134.199/workshops_new/

Joined: May 2004
Posts: 697
D
Member
It's a big decision and you should make it with the advice of a lawyer (and an accountant if you have one). If you don't have one, you will. I did my own taxes as a sole propriotor, but not after incorporating. This is a forum of electricians and you take our advice on legal and tax issues at your own peril.

Dave

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