currently does not pay self employment taxes cause business shows loss, would like to have W2 to pay into to social security and in case have to get personal loans, currently have 2 employees and equipment assets. How do we form the s-corp so he gets a salary and transfer all the assets to the corp? Is this a good idea or not.
My husband is 41 and the business income is around $150000.00 but with the depreciation and expenses it shows a loss
First, you’re a little late for this year. Not that you can’t do it but you’ll have to file two tax returns for this year – one as a sole proprietor and one as an "S" Corp. (You have to change your election of type of filing within 75 days after the end of your fiscal year. That means by about March 15th.)
At any rate, incorporating is a good idea. You don’t indicate how old your husband is and that will play into the decision about salary. He will need to take some salary but should not overlook the tax benefit (avoiding payroll tax) of taking some money as a s corp dividend.
I would suggest you talk to your CPA rather than an attorney. A CPA will charge around $500 to file the papers (a really simple process that you could do yourself) while a lawyer will nail you for at least three times that amount and take weeks or months to do it.
December 1st, 2009 at 7:09 pm
Whether it is a good idea depends on many factors. If the business is losing money now, it does not mean it will stop losing money if you convert it to a corporation. The s-corporation’s income or losses will still belong to your husband as the stockholder. There are some benefits in limiting the personal liability of the owner.
Forming the corporation is not hard. You can usually buy a kit and do it yourself, or you can have a lawyer handle it for you. State laws vary. Capitalizing the corporation by transferring all business assets to it is a normal process, but there are tax implications that you have to consider in the valuation of those assets.
References :
December 1st, 2009 at 7:52 pm
First, you’re a little late for this year. Not that you can’t do it but you’ll have to file two tax returns for this year – one as a sole proprietor and one as an "S" Corp. (You have to change your election of type of filing within 75 days after the end of your fiscal year. That means by about March 15th.)
At any rate, incorporating is a good idea. You don’t indicate how old your husband is and that will play into the decision about salary. He will need to take some salary but should not overlook the tax benefit (avoiding payroll tax) of taking some money as a s corp dividend.
I would suggest you talk to your CPA rather than an attorney. A CPA will charge around $500 to file the papers (a really simple process that you could do yourself) while a lawyer will nail you for at least three times that amount and take weeks or months to do it.
References :