S-corp owners - I got questions
 

For those of you who are incorporated with subchapter S status, I have a few questions....

What state did you incorporate in and why (was it mostly a tax reason)?

How much do you pay yourselves in salary and how much in "dividends" aka dispersments?

If you'd rather not talk about it on here, please hit me up on ICQ 18287590.

I'm considering this option and want some opinions from you seasoned pros.

Thanks.

You should probably talk to a cpa who is familiar with how different states treat corporations.

You should also remember that S Corp is a pass thru of profit and loss to you personally so the state you live in can greatly change your tax percentage.

For instance Texas and Florida have no state income tax, while Arizona is quite a bit higher than North Carolina, so if you were a resident of Arizona, regardless of where you incorporate they will take a nice chunk of your money.

That's about as much as I'd say, other than talk to an accountant.

Yes i'm aware of all these considerations. I put this up mostly so I could find out where the pros do it on this board.

Where do you have your S-corp and how to you distribute your funds?

I am a "C" corp now..and am currently looking into Sub "S"

These are the major requirements for sub "S"

The corp must be a domestic corp,formed in the US
The corp cannot have more than 35 shareholders
The corp can only have individuals,estates, and or certain types of trusts as shareholders.
The corp cannot have shareholders who are not US citizens
The corp can only have one class of stock--(important)

The sub "S" is only advantageous if you want to use it as a write-off against profits from other investments.The shareholders of a sub "S" take the indivual losses against their own income statement.

true...... but I know all of this already. Does anyone actually OWN an s-corp here that is willing to disucss their business with me?

My acc't told me to go LLC instead of S-Corp.

S-corps are better because you can eliminate the 15.3% payroll tax by paying yourself dispersements (dividends). If someone has an S-corp, please hit me up on icq about it.

I'm an S Corp and it works well because you only have to report income you actually remove from the business. So you dont get taxed as a company hen taxed again as an individual. Just allocate your self a small salary and dont worry about anything else.

I pay estimated taxes on my LLC but you probably have to do so also with a S-Corp.

Unless you hire people, then you don't have to worry about payroll since you're the only person in the company. The salary = all of the company's income sans expenses/deductions and taxes.

A company is a company and you're gunna get taxed on it whether it's a corporation, a llc, or whatever.

My acct said the best way to go was to form an LLC and have it taxed as an S-corp. (I don't know the details of that, you'd have to ask a CPA)

The biggest advantage is of course getting around the self employement tax of 15.3%
Take half your profit as a salary and pay the 15.3% on it, take the other half as a dividend. You still have to pay fed and state on the dividend but not social security, so basically you're paying the same tax rates as a person making the same annual income as you without the self employment penalty.

He told me if I took more than half as a dividend, that if I got audited the IRS would make me re-report the numbers and pay the SS tax on the difference.

Also, Schedule C's get audited more than any other IRS form, especially if you take a home office deduction, so you're better off filing as anything other than a sole proprietor.

People do not deserve good writing, they are so pleased with bad. - Ralph Waldo Emerson

Interesting -- I'm going to ask my acc't about this.

You want about 2/3 dividends and 1/3 salary.

I highly recommend opening an offshore company to defer taxes on the cash you dont need.

Finally someone who knows what the fuck their talking about. So you do 1/2 and 1/2 eh? Hmmm.... that sounds like a good number.

So you say 2/3 dividends and 1/3 salary. Hmm.. Ok.... where are you guys incorporated? Have any of you done the out of state thing like incorporating in nevada or delaware for privacy and or state tax reasons?

I have an S-corp formed in Washington state where I reside (no state income tax here).

My CPA told me that if I wanted the buffer of having social security in my old age that it's best if I show that I paid myself a 'pay check'. I do this on paper only at the end of the year. The total amount changes each year. Last year it was $180K. I take taxes on that just as though I was an employee. Deposit the employer and employee portions. This adds some additional Federal Income Tax withheld to my quarterly tax deposits (money that you'd get back from Uncle Sam if you overpay). It also puts a cap on the amount of medicare tax I pay. Without the 'pay check' I'd pay 2.9% of all self-employment income. With the cap I pay 2.9% of $180K (or whatever I show as my payroll for the year). Half of that is absorbed as an expense of the company as is half of the 12.4% of $84,900 (for tax year 2002) for Social Security taxes.

When I incorporated in 1997, I found myself a very good CPA and attorney and we went through all the possibilities for me as a one person company. S-Corp came out on top.

I do not pay myself 'dividends' persay. All the income rolls over to me from the company at the end of the year (on paper).

PK,

Bigup thanks for those details!

forming an LLC is so simple,,

last year self employment tax really kicked my ass,,
out of all the taxes thats what will really screw you over,
by forming a S corp you can save some pretty good money
when it comes to self-employement tax,,

the down size is that there will be more accounting that needs to be down every quarter and you will also have to file 2 tax returns,,

Who cares, it'll save me 10 grand