S-corp Versus Corporation (fees, small business, CPA, c-corp)

[kinkytoes]

Can you guys share any benefits or negatives about S-corp versus regular corporations for a small business? If I don't pay myself a salary, is it beneficial to have an S-corp?

[user_id]

A S-corp is a pass-through entity and the benefits/negatives depend on what you're doing. There is really no way to answer this generally, it depends on the details.

[Suncc49]

Originally Posted by kinkytoes

Can you guys share any benefits or negatives about S-corp versus regular corporations for a small business? If I don't pay myself a salary, is it beneficial to have an S-corp?

Are you planning on living off of draws from the accumulated earnings of your proposed S Corporation?

The IRS would frown upon this, you always need to pay a reasonable salary if financially able to do so.

S Corporation passes through, limits legal liability, and the earnings will be reported via a schedule k-1.

Losses in an S Corporation are only deductible as long as you have positive accumulated earnings (AAA).

[MrLemon]

S Corporation:

You have to pay yourself a reasonable salary (when compared to similar compensation in your industry).

Income and losses flow through to the owner.

You have limited liability like any corporation.

You are limited to the number of shareholders you may have, and who may be an shareholder.

C Corporation:

It is not a pass-through entity so the income gets taxed as the corporate level, and then again when you get a dividend distribution.

None of the s-corp shareholder restrictions.

[kinkytoes]

So, for an S-corp I file personal income taxes w/ an extra form.

For a C-corp I file my personal income taxes and Also file corporate income taxes?



Which one allows me to take the most deductions?

[MrLemon]

That is not how it works at all. Consult a local CPA.

[kinkytoes]

Originally Posted by MrLemon

That is not how it works at all. Consult a local CPA.

I can't afford a local CPA until I get actual profits. At any rate, thanks for the feedback, guys.

I'll keep the regular corporation and pay myself dividends. If there are any problems I'm sure I'll get to learn the correct method at tax time.

[user_id]

Originally Posted by kinkytoes

I can't afford a local CPA until I get actual profits. At any rate, thanks for the feedback, guys.

I'll keep the regular corporation and pay myself dividends. If there are any problems I'm sure I'll get to learn the correct method at tax time.

[MrLemon]

Originally Posted by kinkytoes

I can't afford a local CPA until I get actual profits. At any rate, thanks for the feedback, guys.

I'll keep the regular corporation and pay myself dividends. If there are any problems I'm sure I'll get to learn the correct method at tax time.

That's a terrible plan. You should figure out the tax consequences now. BTW, why do you want to have your entity be a corporation?

[SD4020]

Originally Posted by kinkytoes

I can't afford a local CPA until I get actual profits. At any rate, thanks for the feedback, guys.

I'll keep the regular corporation and pay myself dividends. If there are any problems I'm sure I'll get to learn the correct method at tax time.

If that is the case and logic you really should rethink your plan or can it all together. That mentality of taking the gamble is a perfect setup for disaster.

Pay a bit now or pay tons more in fees and fines later.