110

You pretty much have it straight. In the first case, for 2017, She would have to pay 12.4% (social security) on 127,200 of salary and 2.9% (medicare) on the full amount. That would be $15,772, and $5,800 for a total of $21,572. In the second case, she would pay at total of $15,300. In the case you cite there is pretty much no downside to achieve the ~$6,...


33

The best partnership agreements cover all contingencies often referred to as the 5 D's: death, divorce, drugs, disinterest, and disability. Most do not, however, which makes them such a mess. I was an employee of a firm that went through this, and it is not pleasant from anyone's perspective. Of course you don't have that option now. Your best bet ...


28

Did he say why he wants double your asking price? Did you explain to him how you came up with the offer you made? Sometimes exploring interests (why people make their decisions) is more helpful than bargaining over positions. If you understand why he wants double your offer (and he understands why you're offering a lower price) you might get closer to an ...


24

Many partnership agreements include a shotgun clause: one person sets a price, the other can either buy at that price or sell at it. It's rather brutal. You can make offers that you know are less than the company is worth if you're sure the other person will have to take that money from you, say if you know they can't run the company without you. He has ...


18

Someone else pointed out that this isn't how it works - paying down debt won't decrease profitability for tax purposes. "Someone else" is correct. Principal payments on debt are not tax deductible; only the interest on debt is a tax deductible expense. From an accounting standpoint this intuitively makes sense: when you take out a loan, the ...


15

The answer depends on this: If you had to hire someone to do what you are doing in the S-corp, what would you pay them? If you are doing semi-unskilled work part-time, then $20k might be reasonable. If you are a professional working full time, it's too low. Don't forget that, in addition to "billable" work, you are also doing office tasks, such as ...


7

On the surface I agree with the previous responses, however, since you are for tax purposes an employee, some states will require to you to carry workman's compensation insurance, and unemployment insurance (state & federal). In addition, there could be a higher income tax rate of the IRS believes you are a personal service corporation. Something not ...


6

S-Corp is a corporation. I.e.: you add a "Inc." or "Corp." to the name or something of that kind. "S" denotes a specific tax treatment which may change during the lifetime of the corporation. It doesn't refer to a legal status.


5

Subchapter S Corporations are a special type of corporation; the difference is how they are taxed, not how they relate to their vendors or customers. As a result, they are named the same way as any other corporation. The rules on names of corporations vary by state. "Corporation" and "Incorporated" (and their abbreviations) are allowed by every state, but ...


5

You can make a capital contribution, not a loan. It's not a taxable event, no interest, and you can take a distribution later when the business has the money to pay you back. So yes, transfer the money. If you use software like Quickbooks, make use of unique accounts for tracking the contribution


5

In fact: does JoeCorp have to pay "payroll taxes" on that?? Yes. Any shareholder of an S-Corp with greater than 2% ownership must take reasonable compensation from the S-Corp as a W-2 employee, and payroll taxes apply as they would with any employee. The tax-savings of an S-Corp come from not having to pay payroll/self-employment taxes on the distributions ...


5

Being self employed is always a bit more complicated for loan underwriters because you don't have the proof of income from a third party, like a W2 and pay stubs from an employer. I've heard crazy stories like a lender requesting the bank statements of tenants to prove rental income was actually paid by a tenant. So some of this has nothing to do with your ...


5

Disclaimer: I am not a lawyer. I am not an accountant. I am not even a U.S. citizen. This is not advice. Aside from doing nothing and having the IRS pursue further enforcement actions against you and your business, the options available to you should the IRS deny all your appeals appear to be simply: settle up by paying the fines or penalties as demanded ...


5

The right way to handle this situation is, "You can't charge me penalties because I acted on the advice of my CPA". That is Mr. X's "get out of jail free" card. However, it sounds to me like Mr. X's corporate accounting is being done "on a wing and a prayer" and with far too little interactions with the tax professionals Mr. X ...


4

These are all factually correct claims. S-Corporation is a pass-through entity, so whatever gain you have on the corporate level - is passed to the shareholders. If your S-Corp has capital gains - you'll get your pro-rata share of the capital gains. Interest? The same. Dividends? You get it on your K-1. Earned income? Taxed as such to you. I.e.: whether you ...


4

No, you cannot. Investment is not a tax-deductible expense.


4

That's really not something that can be answered based on the information provided. There are a lot of factors involved: type of income, your wife's tax bracket, the split between Federal and State (if you're in a high bracket in a high income-tax rate State - it may even be more than 50%), etc etc. The fact that your wife didn't withdraw the money is ...


4

The difference between the two is subtle, and it a complicated mix of corporate law and taxes. Company Types First, let's talk about a company without going into taxes at all. A company is something that exists under state law. People like to refer to it as corporate personhood. State laws provide the basis for creating companies. There are different ...


4

Business expenses (deductions) offset business income, so no matter which type of pass-through business entity she is using (Sole proprietorship,LLC,S-Corp,Partnership), the expenses will offset her business revenue. She's taxed on the profit from her business, not the revenue. In both cases, she only has $99,000 in business income reported in the income ...


4

Short Answer I saw a video that mentioned that if you don't want to withdraw all your company's net profit and want to invest it again on the company, it's better to have a LLC over the S-corp. Is that true? This is misleading. Sometimes a limit liability company (LLC) is better, sometimes an S-corporation is better, and sometimes another entity choice or ...


4

You should really talk to your accountant. It's not clear what you're describing, you're talking about invoices and payroll in the same sentence, but they're not the same. If you get an invoice, it goes to accounts payable, and if you have earnings that you want to keep in the corp it goes to retained earnings. When you need to pay the invoice, it goes ...


3

I'm not sure what you mean by "writing off your time," but to answer your questions: Remember that, essentially, you are a salaried employee of a corporation. So if you are spending time at your job, even if you are not billing anything to a client, you are earning your salary. If there are costs involved with these activities (maybe class fees, a book ...


3

"I don't know if it's common or necessary to include capital stock as a liability?" Yes, if you look at the title of the nonasset part of the balance sheet it actually is titled "Liabilities and Shareholders' Equity". Your capital stock is a component of Equity. This sounds like it was reported in a reasonable manner. "$2,582 listed under Loans from ...


3

Generally if you're a sole S-Corp employee - it is hard to explain how the S-Corp earned more money than your work is worth. So it is reasonable that all the S-Corp profits would be pouring into your salary. Especially when the amounts are below the FICA SS limits when separating salary and distributions are a clear sign of FICA tax evasion. So while it is ...


3

I ran this through my accountant and it's the same whether you do it through your company or as an individual. The only difference is the line number where it occurs.


3

As a 1099 contractor, the employee pays both halves of his FICA/social Security/Medicare tax (7.65% per half). As employee of his own S-corp, C-corp or LLC, the employee pays half and the employer pays half. So you end up paying the same taxes. I would like to take a moment to euthanize the trope of "wrap myself in a corporate shell and lower my salary ...


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