Business owners: Did you file as C corp or elect S corp status, and why?

[wyvrn]

I have incorporated, now deliberating whether it would be better to elect S corp status for my small business. I originally planned on straight C, but all the advice I have been given thus far from other small business owners is S corp. for the pass-through tax reasons. Right now I plan on being the only employee. What did you do and why? Also any links would be helpful, I am having trouble finding any really good ones. Thanks!

 

[wyvrn]

^^

 

[Maetryx]

I have a book at home called "Incorporate Yourself" or something. I imagine the law changes too rapidly for my book to be of much value in 2002. Nevertheless, you might want to check for an updated version of it on half.com.

 

[wyvrn]

Great, I will do that. Thanks

rob

 

[linuxboy]

talk to a tax advisor...

if you are having less than 75 shareholders (important limit) and if you want the shareholders to pay taxes, then go S-corp, oh and you only have one class of stock. C corps allow for more flexibility but you have to watch for double taxation, although much of that can be deferred or eliminated to an effective rate of around 15% with good planning and management (things like stock options can be written off, so you can vest stock to yourself, although the IRS IS watching)

In short, look at long-term growth and pick the choice that makes sense now and that will make sense in the future and where the company is headed. The tax benefits of an S corp are sizable though for a small business. Why not look into LLCs?

Wait. You did a corp. You are still liable as the shareholder...

You should have added a second layer and gotten yourself an LLC to be the shareholder or have the corp be the general partner in an LLLP so you can just get a return on invested assets...

Talk to pros to help you set up, you don't want to make mistakes early on.

Cheers !

 

[wyvrn]

Ok bought a book and think I have it figured out.