From Sole Prop to S Corp...nightmare.

[Mikey P]

I could punch the fooker in the throat who recommended the switch.

lordy what a paperwork nightmare, everything is doubled.

Is the corporate veil worth it?

certainly the 8 grand in potential tax savings is NOT.



wifey is pissed.

 

[mirf]

Why did you not go the LLC route

 

[Lee Stockwell]

Went there temporarily, dissolved in 2005 or so. Never again.

 

[Mikey P]

so there is going back?

 

[Lee Stockwell]

Pay the lawyer, sign the letters.

The sky hasn't fallen yet.

Like a Kardashian annulment.

 

[Mark Saiger]

We are an LLC operating as an S Corp....

I believe you can go back....but not an expert on that at all.

The LLC was an easier route of us...and we were Sole Proprietorship before the LLC.

 

[Russ T.]

Saiger" data-source="post: 4348582" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">

We are an LLC operating as an S Corp....

I believe you can go back....but not an expert on that at all.

The LLC was an easier route of us...and we were Sole Proprietorship before the LLC.

I believe that's what we do now. LLC formed at inception in 2008. S Corp formed last year. There were real tax savings for us last year. Accountant handled all the paperwork.

I hate paperwork.

 

[Ralph Pastorelli]

When I started my new business in October my accountant told me to go S corp in stead of LLC so I listened to him.

 

[ronbeatty]

Liability protection, reduction in self employment taxes, healthcare deduction, being an employee of corp for work comp protection were all factors in my dicision to incorporate 20 years ago. If you handle all of your record keeping through the year and your accountant only has to prepare corp return, should cost you less that a grand a year. It has been good for us.

 

[Papa John]

Wow what a timely Post!
I've wanting to go change from Sole P to some sort of Corporate entity for a few years now--- but my CPA says Its not worth it and the Corporate veil can be Easily Pierced. But I want to do it because of the Tax savings.

In the past and maybe with current tax rules it is my understanding, that a Corp can sent aside a large amount of revenue-- Tax Free-- IF those funds are for used for future Investments into the business--- such as buying a warehouse-- which I'm trying to do.. BUT as a Sole P, since I didn't invest/spend that money last year I now have to pay taxes on all that money I saved up.

So with a Corp you Don't really get:
Liability protection--- If you used corporate funds to do anything Personal-- such as take a non business trip somewhere-- you are not protected.
As for Self employment taxes--- In Sole P you get to deduct- I think 25%-50% of Your contribution to SSI into YOUR SSI acct.-- with Corp-- the Corp matches SSI contribution..
But The Tax savings of a Corp seem very appealing.. I'm going to ask my CPA again about going Corp and see if it makes since now.

 

[Chris A]

We did it years ago for the tax savings mostly I didn't remember it being that bigga deal? I'm sure it's 10x more complicated in CA

 

[Chris A]

I didn't feel like paying twice as much into SSI which will most likely not benefit me much at all by the time I retire

 

[Papa John]

I didn't feel like paying twice as much into SSI which will most likely not benefit me much at all by the time I retire

If you are a Corp the SSI taxes are basically double also... You, as an employee, pays SSI. The Corp then also Matches that contribution= 2 SSI payments. If you are a Sole P you get to deduct part of your Company's matching SSI contribution from your taxes as well as all the SSI contribution you made.

 

[Chris A]

My cpa said I was saving money, I dunno any more than that

 

[ronbeatty]

If you do the math correctly, it works out over time.

 

[Willy P]

I didn't feel like paying twice as much into SSI which will most likely not benefit me much at all by the time I retire

Bawb Vawter appreciates all the contributions.

 

[Dan]

Many good responses here. I went from Sole Proprietor to S Corp back in 2006. I was really pretty clueless on the amount of additional paperwork filings that were required by the state of California. I use to get pay this and pay that for the state bills all the time and quickly figures out they were scams. Well, what I didn't figure out is the one that was real and not a scam, next thing I know I'm delinquent with the state. No big deal, I'll just send in the info they requested which was my 600.00 dollars do at the beginning of the year and my meeting minutes or whatever the heck they were called.
So I'm driving down the road in a small City where I've had issues with the cops and my box truck (they had 3 commercial truck enforcement patrol units in a city of 30,000) cop is at the stop sign and as soon as I turn and pass he turns around and gets me, no front license plate on truck was his reason. I received a ticket for that, but what he was really after was commercial truck violations..... I was not aware that because the state suspended my corparation over tax issue my CA number was also suspended. That was a 500.00 dollar ticket. I had to go to court and the judge proceeded to tell me what a total hazard I was on the street for driving with a suspended CA number. I had to go down and refill Sole Prop get a new CA number and new license plates since I didn't have one for the front. Got a piece of duct tape and wrote my new CA number on it big and bold per the state code and made sure it could be read from 50 feet away. Went to police station to get ticket signed off for the CA number and the cop tried to not write it off... Why officer? .... You wrote it on duct tape with a marker... Problem? Well that doesn't look very professional..... Excuse me, I don't give a F*ck what you think, it meets the requirements..... I'm not sure I can read it from a distance...... State code says 50 feet. I grabbed my rolatape and said.... Would you like me to roll out 50 feet for you? Needles to say he finally signed me off.

This story is a lot bigger actually but I'm done ranting,

 

[Ron K]

People sue Corporations everyday. Insurance covers liability. I think?

 

[Dan]

If your going for the Corporation umbrella your incorporating for the wrong reason. The advantage of not being taxed until you actually use it is nice. The additional paperwork can quickly become a nightmare.

 

[Papa John]

Isn't California something like the 5th largest economy in the WORLD!?? I'm sure If it weren't for that ALOT of business would leave California.

This is why I'm thinking of switching to Corp:
Business as Sole P with $100,000 gross profit= 39% tax due to Alternative minimum tax AND That's just Federal.
Business as Corp with "$100,000 gross profit"-
"owner" paid by paycheck $50,000= maybe 25% Fed?
Company profit $50,000= maybe 15-20% fed tax?

But their are many details which are over my head to understand--- SO I'll ask my CPA again IF Corp now makes since for Me... Maybe the paperwork is the reason he advised against it in the past?

 

[Papa John]

Many good responses here. I went from Sole Proprietor to S Corp back in 2006. I was really pretty clueless on the amount of additional paperwork filings that were required by the state of California. I use to get pay this and pay that for the state bills all the time and quickly figures out they were scams.
This story is a lot bigger actually but I'm done ranting,

Dan sometime when you have the time-- Can you please share those Scam stories with the rest of us so that We can avoid them?

 

[Askal]

Some good info here and a lot of really bad info. Go see a CPA. Not a bookeeper. We save about 20k a year being an s corp.

 

[truckmount girl]

I have always been a Sole Prop. and have never regretted it. One huge thing that tipped it for me....if you get sued as a corporation, you MUST hire a lawyer to represent you. You cannot represent yourself. Sole Proprietors can represent themselves. If we had incorporated in the beginning or I had incorporated my carpet cleaning biz, I never would have been able to continue fighting Chem Who.

I don't have to worry about tax costs....if I actually claimed all of the charitable deductions I have receipts for each year I'd never pay a dime, but I don't. I just take what I need to take. I don't want to get audited every year to show them my charitable receipts...

Take care,
Lisa

 

[Wandslinger]

Why officer? .... You wrote it on duct tape with a marker... Problem? Well that doesn't look very professional..... Excuse me, I don't give a F*ck what you think, it meets the requirements..... I'm not sure I can read it from a distance...... State code says 50 feet. I grabbed my rolatape and said.... Would you like me to roll out 50 feet for you? Needles to say he finally signed me off.

He should have thrown your broke dick in jail Dan...

 

[Dan]

There is a benefit at some point which I believe your near but at that point the savings you can get would be of benefit and thus allow you to pay your accountant to keep you on the straight and narrow.

 

[Dan]

He should have thrown your broke dick in jail Dan...

well.... He wasn't the cop that pulled me over just the one who wanted to give me a hard time about signing it off. Maybe I had an attitude but I seriously doubt it.

 

[Dan]

Dan sometime when you have the time-- Can you please share those Scam stories with the rest of us so that We can avoid them?

The scam stories... Let me clarify a little. I would receive invoices that were very expensive and what they were was solicitations to submit my minutes meeting documents. They looked like they were mailed from the state, they were mailed from Sacremento, they had seals on the envelopes and so forth that a quick glance you wouldn't think twice about. I was getting second and final notices. What I didn't notice after I knew they were fake was when the real state request came. It was a big mistake on my part but I'm sure you can understand how it happened. Keep in mind once incorporated the state is tied to your commercial auto policy, CA number and who knows what else. If the state decides your out of compliance and suspend your corporation from doing business they suspend everything and you'll know when you have a situation like I did. The only thing they didn't stop was my bank account for the corporation, I still ran for well over a year using it. My tax man had to fix it and he also sent the corparation withdrawal form in. Most of the fines they were hitting me with were after I was suspended, they suspended me and continued to to charge me annual fees for being incorporated and late fees for it. In three years I was over 10,000 dollars in fees and fines and still suspended.
If I were in your shoes today making 100K profit and thinking about incorporating I would only do it knowing my accountant is going to handle my required filings and be there to properly guide me. John, feel free to contact me and I will give you a start to finish explanation on the phone. This was a six year problem in total before I got it taken care of. I hope.

 

[Papa John]

Thanks Dan!!
Sounds like in return for lower taxes for Corp-- you are also giving the State Increased Ability to "Hold on to Your BALLS"

I will discuss with my CPA again. now I understand why he may have rejected the idea of me going Corp.