Announcement

Collapse
No announcement yet.

Setting up C corp

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • jfoxcpacfp
    replied


    I am indeed a physician, finished first year of law school and now finishing the accredited wealth management advisor course. Still this is all theoretical stuff and can’t replace real world answer to a specific issue.
    Click to expand...


    I see. You're right - I knew nothing but facts and theories when I finished school (and graduated valedictorian lol). Started my career with a good work ethic and learned everything else on the job.

    Leave a comment:


  • Kamban
    replied




    Technically, you don’t have to take all the distributions from the S-Corp accounts, but you are still taxed as though you did regardless.
    Click to expand...


    Yes, whether it remains in the S corp account or in your personal banking account you are already taxed on it and next year you will be taxed only on the new income for that year in the S corp account. I leave "already taxed" money in S corp to cover expenses rather than have a line of credit.

    Leave a comment:


  • Kamban
    replied


    The remaining amount is paid and reported as distributions. You will still pay income taxes on the S-Corp’s distributions, but no payroll taxes. This is the source of the you will “save taxes” with an S-Corp. However, you have to balance this saving in payroll taxes with the cost to run the payroll, state annual fees and taxes for being an S-Corp and the accounting and additional fees to file as an S-Corp. So then the determination is, do you save enough in payroll taxes to offset those other costs. Also, even if you do save a marginal amount, is it worth the extra hassle and your personal time to do so. There may be other reasons for an S-Corp, but there again this is dependent on specific circumstances.
    Click to expand...


    I agree that for a one person company the S corp may be overkill. But for people who have employees and quarterly payroll fling, annual filing and W2 are part and parcel of doing business. So S Corp adds the benefit of avoiding the medicare taxes on reasonable distributions.

    Leave a comment:


  • spiritrider
    replied
    Technically, you don't have to take all the distributions from the S-Corp accounts, but you are still taxed as though you did regardless.

    Leave a comment:


  • Kamban
    replied


    Regarding S corp – what happens with income I am not paying myself? Does it get taxed?
    Click to expand...


    You take the money at the end of each year. Nothing is left behind. You take part of it as salary and part as distributions. It comes to your personal income tax folio and you pay taxes on it.

    Next year the S corp starts with balance of zero until you add income to it.

    Leave a comment:


  • spiritrider
    replied
    $54K. Easy in a one-participant 401k with an $18K employee deferral and $36K employer contribution. Also possible in a SEP IRA with >= $270K in W-2 wages.

    If you are just starting out, you are probably too young, but at some point a cash balance plan will allow you to put even more away.

    Leave a comment:


  • mdfamily
    replied
    Thanks for the excellent answer spiritrider.

    What about retirement?

    When I was employed I could put away about 17500 pre tax and I think employer put the same, although there was vesting and I didn't eventually get the full employer contribution.

    What is the max I can put in retirement as pre tax money meaning I can save on tax payments?

    Thank you

    Leave a comment:


  • spiritrider
    replied




    Regarding S corp – what happens with income I am not paying myself? Does it get taxed?
    Click to expand...


    Yes, as I said in my previous reply, net income not received as wages, is classified as distributions, reported on Form 1040 Line 17 and included in your AGI and taxed as ordinary income.

    With that level of income, an S-Corp likely makes sense. Whether a C-Corp could make sense is probably to difficult to determine in an online forum.

    Leave a comment:


  • mdfamily
    replied
    Hi!
    I am indeed a physician, finished first year of law school and now finishing the accredited wealth management advisor course.

    Still this is all theoretical stuff and can't replace real world answer to a specific issue.

    As for Wyoming, if im only partially working in New York state I understand this will be beneficial.

    I believe I'm ok with malpractice as this is typically covered by the staffing company or hospital I work at.
    Income is in the 500-600 range.

    Regarding S corp - what happens with income I am not paying myself? Does it get taxed?

    Leave a comment:


  • spiritrider
    replied




    So S corp is preferred?

    So many different opinions out there, and I am talking about accountants, not regular folk…

    With S corp, you pay yourself a salary, correct? Does that mean you only pay taxes on the salary you pay yourself?
    If so what happens with all the money you are not paying yourself and stays in the S corp bank account? I
    Click to expand...


    No, an S-Corp is not necessarily preferred. Leaving the single member LLC as a default disregarded entity and filing as a sole proprietor may even be the better choice. Each situation is different. Depending on your income level and the states you will be taxed in, an S-Corp may be a better solution.

    As sad as it is, many CPAs and tax professional do not always give the best advice when it comes to business entity type. Very often they just take a one-size-fits-all approach to business entity types. Also, I'm not casting aspersions on the profession as a whole, but some may be influenced by the fact they will receive far more in fees for a corporation/personal return than a personal return with Schedules C & SE.

    Yes, with an S-Corp, you pay yourself a "reasonable" salary which is subject to income and payroll taxes. However, most doctor's salaries will be greater than the amount (2017 = $127,200) subject to the 12.4% Social Security (SS ) component (6.2% employee + 6.2% employer). This means that you are only saving the 2.9% Medicare component (1.45% employee + 1.45% employer) and the ACA 0.9% Medicare surtax (> $200K S, $250K MFJ) over that of being self-employed.

    The remaining amount is paid and reported as distributions. You will still pay income taxes on the S-Corp's distributions, but no payroll taxes. This is the source of the you will "save taxes" with an S-Corp. However, you have to balance this saving in payroll taxes with the cost to run the payroll, state annual fees and taxes for being an S-Corp and the accounting and additional fees to file as an S-Corp. So then the determination is, do you save enough in payroll taxes to offset those other costs. Also, even if you do save a marginal amount, is it worth the extra hassle and your personal time to do so.

    There may be other reasons for an S-Corp, but there again this is dependent on specific circumstances.

    Leave a comment:


  • jfoxcpacfp
    replied
    My bet is you keep hearing wrong. A c-corp is probably overkill, more expensive, and less flexible than what you need. Depending upon how much $ you're earning doing locums, you should consider either an S-corp or a sole proprietorship. If you are bringing in < $300k - $350k but don't have good malpractice coverage, you might want to consider an SMLLC (Single Member LLC) although this formation is not available for you in CA.

    Moving the company to WY is not useful as you'll still be required to file and pay taxes in NY as an alien company. You'll write yourself payroll checks with a corporation but not with a sole proprietor or SMLLC.

    Your profile states that you are a physician, financial advisor, and an attorney. If that's not a typo, your education and experience will hopefully be of some use in trying to make this determination.

    This article may help:

    What Business Entity Should I Choose?

    Leave a comment:


  • ajm184
    replied




    Double check the tax situation in your case for C Corp before you embark on it. It is great for large companies but I doubt a one a two person company will derive any benefit from it. The paperwork is more complex. Years ago I was told that money left undistributed gets taxed in the C Corp and you pay taxes again when it is distributed to you. No sure if it applies now.

    LLC or S Corp is the way to go.
    Click to expand...


    There is a double taxation potentially present, but is based on the 'profits' of the C-Corp.  As a solo physician, this part will be extremely easy to manage the C-Corp profit level.  The C-Corp 'making' $500 per year and paying 35% on that number isn't going to make a difference financially.

    Leave a comment:


  • mdfamily
    replied
    Because I read it's better taxation wise compared with new York

    Leave a comment:


  • ReFinDoc
    replied
    Why did you move your LLC to Wyoming? Did you move there yourself?

    Leave a comment:


  • mdfamily
    replied
    So S corp is preferred?

    So many different opinions out there, and I am talking about accountants, not regular folk...


    With S corp, you pay yourself a salary, correct? Does that mean you only pay taxes on the salary you pay yourself?
    If so what happens with all the money you are not paying yourself and stays in the S corp bank account? I

    Leave a comment:

Working...
X