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To: bentway who wrote (158218)	10/17/2008 7:43:44 PM
From: Bank Holding Company	Respond to of 306849

s corp good. c corp bad. any questions?

To: bentway who wrote (158218)	10/18/2008 4:28:50 AM
From: Travis_Bickle	Respond to of 306849

behold the power of Google! en.wikipedia.org en.wikipedia.org

To: bentway who wrote (158218)	10/18/2008 12:24:35 PM
From: neolib	Read Replies (1) \| Respond to of 306849

For a small business, S corp is generally considered better, but you need to well consider the following issue. FICA taxation on the owner. The distribution of income to the shareholders in an S corp is not subject to FICA tax, BUT, if you as a shareholder work in the corporation, your work MUST be treated as wage income, so the S corp must still handle all your work as regular employment and do all the paperwork and withholding associated with that. I work largely as a consultant, and for years did this just as a sole proprietorship, then changed to a C corp when I started making some products in addition to consulting, and later switched to an S corp. There is a temptation as a single employee corp, to try and take as much income as possible via distributions, and as little as possible via wages because of FICA. Many articles point out this as an advantage of the S corp over a C corp. This is not true, because the IRS is increasingly concerned that work be treated as wage income in the S corp. If you are basically consulting from within an S corp, than 100% of your consulting income is really wage income and the IRS will want you to treat it that way. If the S corp has additional employees, especially if some of them are clearly not owners or significant owners but have substantial wage income (i.e. they look more or less like full time employees) then it becomes quite reasonable that the business profit which the owner takes in distributions are not 100% the result of his own wage work, so the IRS will be fine with you taking a reasonable wage, and the rest as distributions. So bottom line is that if you are a single person and you want corporate protection (vs. staying as a sole proprietor) than the double taxation as claimed for C corps is not really true, because you take your income as wage income in either the C or the S. The only advantage of the S is to the degree that you can shift some of your income to claim it as profit, not wage, in a manner that will stand up to IRS review. One final thing to note about FICA, is that the SE combines all schedule C's & F's prior to calculating FICA, so that is an advantage to sole proprietorships rather than S or C corp wage income IF you have other ventures which generate losses. This have been significant for me, because I built up a farm while earning consulting income. Your loss businesses, of course can run afoul of hobby exclusion rules...