« Avoiding Mistakes When Hiring Employees Webinar - June 11th | Main | How to Find a Lawyer When You Need One »

06/06/2011

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a0133f3fc5805970b01538efe8b2e970b

Listed below are links to weblogs that reference Should You Form an S or C Corporation?:

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

donyu

Would you not have your business rent back your house space and so still get the deduction?

Tom Copeland

If the business rents the house from you the business can claim the rent as an expense. But you have to report the rent as rental income as an individual on Schedule E. However, you cannot claim house expenses as a deduction on Schedule E. See IRS Code Section 280A.

Maria

Isn't another advantage that you can be covered under workman's comp. and unemployment benefits.

Tom Copeland

Maria - Yes and no. Yes, because you could get unemployment as an employee of a corporation, but no, you can be covered by workers' compensation even if you are not incorporated. I don't think these two issues are a significant reason to incorporate.

Christopher  S Thomas, CPA

The costs and benefits to being an LLC and electing to be taxed as an S corporation (no corporate meeting, or minutes requirements) varies from state to state but a local CPA can calculate if it would be worth it. Yes your compliance costs are higher with an S corporation, especially if you don't already have an employee or two. Additionally you do loose your depreciation which might only be 300-600 in deductions, but the time space utilization of your home and other assets can be "reimbursed" that is to say expensed through the corporation(you) meaning the bulk of the tax benefits are kept and economically the same. the big benefit is the employment taxes. If the operation is looking at 50,000 in net earnings you are looking at over 7,500 in Social security and medicare taxes before you even begin to pay for income taxes. if you were treated as an S corporation your pay might be say 20,000 as wages saving you over 4,500/year which usually pays for the added costs of compliance and can usually get you an accountant year round to provide consulting, bookkeeping, financial reporting, tax planning, etc. To conclude, it may be appropriate to consider being an S Corporation, but that usually requires enough net earnings before it pays for itself through the tax savings.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated, and will not appear until the author has approved them.

Top Blog

  • Direct Capital Top Money Management Blog

Subscribe

  • Email Subscription

    Enter your email address:

    Delivered by FeedBurner

Poll

Become a Fan

Blogroll