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I have an S corp and am starting a new relationship with a business partner, who is going to contract my services. They said 1099 or corporate to corporate, in terms of how I get paid.

If they pay me by 1099, can I as president of the corporation put that in the corporate bank account, or does it have to go to a personal bank account?

I know 1099 is an IRS form that says you basically did business with a person. I'm not sure of the advantages of 1099 versus other ways of paying.

  • Wow 5 years have passed. The answer is that I am a 1099 contractor to my client. My S corp pays me my salary, I bill invoices to my client, they pay my corporation. I put the money in a corporate checking account. My corp pays me salary against that checking account (the corp is taxed on this - employment tax etc). I also take distributions. I submit corporate taxes to the IRS. My personal taxes (1040 form) reflect the distributions and W2 from my corporation. – Rob Feb 14 at 18:27
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Do not mix personal accounts and corporate accounts. If you're paid as your self person - this money belongs to you, not the corporation. You can contribute it to the corporation, but it is another tax event and you should understand fully the consequences. Talk to a tax adviser (EA/CPA licensed in your State).

If they pay to you personally (1099) - it goes on your Schedule C, and you pay SE taxes on it. If they pay to your corporation, the corporation will pay it to you as salary, and will pay payroll taxes on it. Generally, payroll through corporation will be slightly more expensive than regular schedule C. If you have employees/subcontractors, though, you may earn money which is not from your own performance, in which case S-Corp may be an advantage.

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These are differences which matter. If you have to go to StackExchange for "entities 101" questions like this, that means your team is not performing properly.

"your team" means you, any staff, lawyer, CPA, tax advisor, etc. It is perfectly OK to have a CEO who doesn't understand this stuff, as long as the CEO relies on trusted advisors who do.

Why not just use Stack Exchange as your attorney etc.? Liability. If your attorney or CPA tells you to do X, Y and Z, and IRS later says "oh no no, X Y and Z were the wrong thing to do, here's $1000 in back tax, $100 in interest and $5000 in penalties", you show them the piece of paper where the licensed advisor told you to do that, and IRS goes "Oh. OK. Penalties waived".

If your team can't carry the weight, or if this grates against your personal style, then you should review why you selected an S-corp. in the first place. I think a passthrough Single Member LLC (SMLLC) would be a better fit, since the taxes are simpler -- IRS treats it as a disregarded entity, so errors like that won't matter to the IRS.

Of course, being sloppy with individual identity vs corporate will still hurt your liability shield, which is the thing most people get LLCs/corps for, so your team still has to watch that.

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