Enhancing Profits Through Incorporating Message Board

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Non-Tech : Enhancing Profits Through Incorporating

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To: CCWriter who wrote (10)	3/16/1997 3:48:00 PM
From: SE	of 88

TO All: There is no sure fire way to avoid taxes or to get extra tax benefits through incorporation. It is an individual by individual basis. Assuming the main purpose herein is to shelter investment income and provide for more deductions, a corporation can be a mistake. If all you are doing is moving your investment gains/losses to the corporation you will be liable for the tax on a personal holding company. This tax is in addition to regular corporate income tax and is applied at a flat rate of 39.6% on any undistributed personal holding company income. What this means is that you must distribute the corporation's income to the shareholders. This is what is known as a dividend. Therefore generally speaking instead of gaining on the tax authorities you are behind. You must pay the corporate level tax on the profit and then the individual level tax on the dividend distributions. I have found that many individuals who talk of incorporating as a panacea (sp) don't know what they are talking about. There are extra tax filings, extra records to keep, minute books and meetings that must be held etc.... The main reason for incorporating is to limit personal liability. For a lot of smaller businesses (not investment activities) incorporation won't make sense as the added cost could be spent on extra insurance. There are many attorney's and accountant's that will disagree with this, and I see many of their disagreements as a way to incur more fees for themselves as opposed to having the best interests of their clients at heart. For most of you, if you have a good CPA, they are already on top of this and providing you with the best advice available. If you are doing your own taxes (which is fine) I might suggest a consultation with a CPA to discuss your individual situation and see if you are missing anything. I have been at this for several years and still don't know all of the rules in the Internal Revenue Code. Just remember that these are very complicated issues that individuals spend their lifetime pursuing. Scott PS -- Wait until after April 15th to set up such a meeting. The CPA you choose will then be rested and better able to spend some time with you making certain that you are doing everything correctly for your situation.

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