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  #1  
Old 05-18-2002, 07:58 PM
cigar6 cigar6 is offline
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Join Date: Feb 2002
Location: virginia
Posts: 13
considering incorporating??

I am currrently operating my business as a sole prop., and am considering incorporating.

Anyone recently made this move??

Advice-pro's and con's??

Thanks for your input guys.
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  #2  
Old 05-18-2002, 10:14 PM
John Allin John Allin is offline
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Join Date: Sep 2000
Location: Erie, PA
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Why do you feel you need to incorporate??
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  #3  
Old 05-19-2002, 03:14 PM
wolfpacklawn wolfpacklawn is offline
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Join Date: Nov 2001
Location: Reno, Nevada
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Under the advise of my accountant I created an S-Corp this last year. I'm very glad I did this as it is saving me a ton of $ in SE/Social Security Medi taxes. Everyones situation is different so you need to talk to an accountant and see if it would help your biz. Also, Nevada is a very friendly state for corps, your state might not be and any savings you see on the federal side may be eaten up on the local side.

How does it save me in SE taxes? By creating an S-corp I now become an employee of the corp. I now give myself a monthly salery and of course have to pay Social Secuity/ Medi taxes (15.2%) which is the same I would be paying in SE taxes. However my salery isn't my net profit, it is much less(your SE taxes are calculated on net profit). So the $ I take from the corp. as profits doesn't get taxed the 15.2%. I still have to pay income tax on it but that's it. I don't know all the nuiances of how this works so talk to your accountant and he'll be able to explain it better. All I know it that I am paying much less in taxes now that I have an S-corp than I did when I was a sole prop.

Somebody is going to post that I am wrong about this because they always do when this question comes up but talk to an accountant about if an S-corp can save you money on your taxes. In my case it does.
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  #4  
Old 05-20-2002, 07:28 PM
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smburgess smburgess is offline
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Join Date: Dec 1999
Location: Richmond, Virginia
Posts: 469
Another good thing about s-corp is you can take dividends whenever you want, and pay NO ss or medi-care taxes on them (but you do have to pay federal and state income taxes). I take anywhere from 10K to 20K a year in dividends.
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  #5  
Old 05-21-2002, 09:07 PM
John Allin John Allin is offline
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Join Date: Sep 2000
Location: Erie, PA
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SE tax is no longer a factor once profit (as a sole prop) reaches just over $80K. Thus, if your profit exceeds this figure, there is no more SE tax to pay. In this event, your taxes actually increase as the C corp tax on profits is much higher than the tax on a sole prop's profit. It changes slightly for a S corp, and I'm not that familiar with S corp tax situations. And I know nothing about the tax implications for an LLC.
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