Needed tips: how to incorporate, IRS audits of S-type corps

curt504 · Guest

I'm looking for sites, books, groups of where to learn and discuss the
ins and outs of setting up a corporation to run my consulting income
through? I can figure out how to contact the Sec of State and pay the
fees etc. But the accounting software, practices, paying taxes etc.
Tax time deductions etc.

Advice on the S vs C corporation for consultants. Most do S one friend
does C and the C guy has good reasons. IRS is auditing personal S
types ???

Thanks alot, curt

John A. Weeks III · Guest

In article <11n1glo3favp7a4@news.supernews.com>,
"curt504" <chsmith@speakeasy.net> wrote:

Quote: I'm looking for sites, books, groups of where to learn and discuss the
ins and outs of setting up a corporation to run my consulting income
through? I can figure out how to contact the Sec of State and pay the
fees etc. But the accounting software, practices, paying taxes etc.
Tax time deductions etc.

Advice on the S vs C corporation for consultants. Most do S one friend
does C and the C guy has good reasons. IRS is auditing personal S
types ???

You are making it way too complex. Skip the corporation and
run as a regular business. If you use your full name in the
name of the business, you don't even have to file any paperwork.

Taxes are easy...each quarter, pay about 20% of your income to
the feds, and whatever is appropriate for your state. Then do
a schedule C for your business as part of your normal taxes.

You can pick up a $10 tax guide at the local bookstore to learn
about deductions. Try to deduct everything you can since each
$1 in deductions is another 30 cents less tax you pay.

Finally, visit a good financial planner and learn how to take
advantage of the small business retirement plans. They are
far too valuable to miss out on.

Many folks think they have to incorporate to be a business.
That isn't true. Some folks think that being a corporation
gives them special status with risks, lawsuits, and mistakes.
That isn't true, either. As a consultant, you would be the
one making the mistakes, so you would be liable whether or
not you were incorporated. The best advice is get a boat load
of insurance. Check out the WJClinton policy at State Farm.
They off a $1-mil umbrella policy for about $100 a year.

Don't worry about IRS audits. There are so many people,
and so few auditors. I only know of one person who was
ever audited, and he got audited because he failed to pay
several years worth of employee pay check withholdings.
If you keep reasonable records and don't cheat, you have
no downside risk in an audit anyway.

If you do incorporate, mainly so you get to do all kinds
of extra paperwork and pay lots of extra fees, then you
most likely want an S-corp since your income will mostly
be as a one man show. C-corps might be better if you plan
to have a lot of inventory or hire a lot of people.

-john-

--
======================================================================
John A. Weeks III 952-432-2708 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================

Jack · Guest

My state, Illinois, has booklets that describe paying taxes, etc. You
might check both your state and the IRS.

I have had a subchapter S for 15 years and can't find any advantages to
a C.

Ask specific questions and I'm sure someone here can answer them. I
don't know of any good books or web sites that can help you.

Jack

Charles Calvert · Guest

On Tue, 08 Nov 2005 15:22:32 -0000, "curt504" <chsmith@speakeasy.net>
wrote in <11n1glo3favp7a4@news.supernews.com>:

Quote: I'm looking for sites, books, groups of where to learn and discuss the
ins and outs of setting up a corporation to run my consulting income
through? I can figure out how to contact the Sec of State and pay the
fees etc. But the accounting software, practices, paying taxes etc.
Tax time deductions etc.

Your best bet is to talk to a competent attorney and accountant. It
will be faster than combing through books, web-sites, etc.

Having said that, you can find some good books from Nolo Press
<http://www.nolo.com/>.

Quote: Advice on the S vs C corporation for consultants. Most do S one friend
does C and the C guy has good reasons. IRS is auditing personal S
types ???

This is impossible to answer without knowing your specific situation.
A good accountant is your best bet.
--
Charles Calvert | Software Design/Development
Celtic Wolf, Inc. | Project Management
http://www.celticwolf.com/ | Technical Writing
(703) 580-0210 | Research

fp · Guest

Here are 3 web sites that might help.
www.taxguru.org
www.taxguru.net
www.selfemployedweb.com

--
******************************
Fred Parker
Lynn Consulting Group, L.L.C.
http://www.lynnconsultinggroup.com
******************************

curt504 · Guest

Thanks alot John,

I'm admitting to being a neophyte re the ins and outs of setting up a
consulting business, but why have virtually everyone of my IT
consulting friends incorportated if there is no tax, deduction or SEP /
KOEG benefit?

Might it be lemming or sheep behavior? :)

Any point-counter-point on incorporate vs not incorporating?

BTW, my goals are simple, fund a SEP/KEOG at the maximum, dedect
expenses for laptops, software, training.

Ok, not incorporting should be able to the above.

But what about retaining earnings in the corp that I don't pay out to
myself as W2 income for a rainy day and buying stuff as corporate
assets like cars, laptops, investments into say realestate? Does it
even make tax sense to buy assets or investments in a corporation vs as
a personal business or just personally?

I'm operating under a possible delution that a personal S-corp allows
me to take buy/invest at an advantaged tax rate???

Thanks to all, curt

curt504 · Guest

John, I just thought of a possible must-do reason for incorporation. I
need to verify but I'll guess that most of my potiential client /
consulting agencies won't do corp-to-business compensation, just
corp-to-corp with tax ID.

What's your take OR is corp-to-corp (with a tax ID) doable if I'm not
incorporated, just a personal business? Sounds like I just asked
something stupid? :)

tnx, curt

Chuck Cox · Guest

curt504 wrote:
Quote: John, I just thought of a possible must-do reason for incorporation. I
need to verify but I'll guess that most of my potiential client /
consulting agencies won't do corp-to-business compensation, just
corp-to-corp with tax ID.

You didn't say what kind of consulting you do, but if you are a
technical consultant and wish to work on a 1099 basis, most agencies and
large clients will only do that with corporations. Be aware that
incorporation alone is probably insufficient to convince many agencies
and large clients to work with technical consultants on a 1099 basis,
especially if you are a single-employee corporation.

--
Chuck Cox - SynchroSystems
chuckPORK@synchro.com, cccoxPORK@fas.harvard.edu, www.synchro.com
my email is politician-proof, just remove the PORK.

xpyttl · Guest

"Charles Calvert" <cbciv@yahoo.com> wrote in message
news:11n56or1nspqhee@news.supernews.com...

Quote: Your best bet is to talk to a competent attorney and accountant. It
will be faster than combing through books, web-sites, etc.

WOW. First piece of decent advice in this thread.

Contrary to what some posters have suggested, there is no one size fits all
solution. There are advantages and disadvantages to every business form.
"Own your own corporation" by Sutton touches on many of these.

The greatest driver in most cases, though, is your personal financial
situation and goals. To really understand these you need to have a very
detailed discussion with your accountant. After you understand the
financial implications, then talk to a lawyer. There are all sorts of
hassles associated with each business form. The hassles are somewhat
different, and you will probably have tolerances for some of these hassles
that are different from the next guy.

Quote: Advice on the S vs C corporation for consultants. Most do S one friend
does C and the C guy has good reasons. IRS is auditing personal S
types ???

This is impossible to answer without knowing your specific situation.
A good accountant is your best bet.

Again, right on. The major difference is that with an S corp, all the
income is your income. With a C corp, the corp pays taxes on it's income.
Then you get to pay taxes on whatever you take out. For most consultants,
this is a bad deal because you pay twice. But in some situations, it can be
quite a good deal. It all depends on your goals, and you need to have a
real heart to heart with a good accountant to help you clarify those goals.

Keep in mind that you need to look at the whole picture. A corp will cost
you a grand or so to set up, and then a few hundred a year in filing fees
and accountant fees over what, say, an LLC might take. However, if that
saves you ten grand a year in taxes its a bargain. Depending on your
situation, a corp might cost YOU more in taxes. There are certain things
you have to do as a corp that you might find to be a real hassle. However,
there are things that you can do that a proprietorship can't that might make
up for the hassle. Only you can answer those questions, and your answer
won't be the same as the next guy.

See an accountant, see a lawyer, and then make the choice that is best for
you. Forget about what your buddies did. They aren't you.

...

Jack · Guest

I would add that an advantage of a S Corporation is that you can pay
yourself a modest but not too modest salary on which you have to pay
income tax, SS, medicare, etc. Then you pay the rest of your income to
yourself as a year end disbursement on which you only have to pay
income tax but not SS, medicare, etc.

Jack

John A. Weeks III · Guest

In article <11ncbm0lu7tmt57@news.supernews.com>,
"curt504" <chsmith@speakeasy.net> wrote:

Quote: Any point-counter-point on incorporate vs not incorporating?

BTW, my goals are simple, fund a SEP/KEOG at the maximum, dedect
expenses for laptops, software, training.

Ok, not incorporting should be able to the above.

But what about retaining earnings in the corp that I don't pay out to
myself as W2 income for a rainy day and buying stuff as corporate
assets like cars, laptops, investments into say realestate? Does it
even make tax sense to buy assets or investments in a corporation vs as
a personal business or just personally?

I'm operating under a possible delution that a personal S-corp allows
me to take buy/invest at an advantaged tax rate???

Actually, running as a standard business (sole proprietorship) as
opposed to a corporation has a big advantage for buying stuff.
You can buy up to some big number (was $17,600 last time I
checked), and write it off all at once in one year. If you
were a corporation, you might have to amortize that over the
life of the product you are buying. You get the same deduction,
but spread out over 5 or 10 years, where as the sole proprietor
gets the deduction all in one year.

You can also buy cars, real estate, and whatever you want as
a sole proprietor. It is by far the most common form of business
out there.

-john-

--
======================================================================
John A. Weeks III 952-432-2708 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================

John A. Weeks III · Guest

In article <11ncbmf5s6tig61@news.supernews.com>,
"curt504" <chsmith@speakeasy.net> wrote:

Quote: John, I just thought of a possible must-do reason for incorporation. I
need to verify but I'll guess that most of my potiential client /
consulting agencies won't do corp-to-business compensation, just
corp-to-corp with tax ID.

What's your take OR is corp-to-corp (with a tax ID) doable if I'm not
incorporated, just a personal business? Sounds like I just asked
something stupid? :)

You can file for a tax ID without being a corporation. Normally,
as a standard business (sole proprietor), you use your social
security number. But you are allowed to request and use an EIN
(employeer ID number) from the IRS. This looks just like a SSI
number, and acts like the SSI number for a corporation.

Nobody every needs to know the details of how your business
is organized. If someone asks, simply state that you are a
legal business in the state of wherever you live, and offer
up the EIN number if they would like to confirm your status.

-john-

--
======================================================================
John A. Weeks III 952-432-2708 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================