How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Loren Your Own Question
Loren, Attorney
Category: Business Law
Satisfied Customers: 28538
Experience:  30 years experience representing clients .
Type Your Business Law Question Here...
Loren is online now
A new question is answered every 9 seconds

I need a comprehensive answer please. Hi, I incorporated

This answer was rated:

I need a comprehensive answer please.

I incorporated a C CORPORATION in the state of Nevada in January 2010 for the purpose of conducting business of online sales of textbooks etc.Currently my business is based in Los angeles california.

I am drawing a salary from the corporation equivalent to $ 2500 every month.
The problem is that I am unable to draw more money as salary from the corporation every month as it would increase the social security as well as the federal tax liability.
What is the way of drawing more money from the corporation everymonth without substantially increasing the tax liability .
Do you suggest I change the status of the corporation to an S CORPORATION.
What are the advantages of an S coprporation over a C coprporation????
Thank you in advance.
If you convert to an s Corp (and you may have to dissolve and reincorporate because there are time limits for making an s Corp election) you can continue with your payroll but you can take everything out. The main benefit is that you do not get taxed at the corporate income level. The s corp is a pass through entity and all profits and losses pass to you.
Customer: replied 5 years ago.
Does that mean I cannot take money out of the C corp without avoiding tax at the corporate level in addition to personal level.
Are there any advantages of a c corp over an scorp?
A c Corp has a double taxation. One at the corporate level and one on the shareholder. Not all situations qualify for s Corp status. There are restrictions on how many shareholders and who can be a shareholder. A C corporation is probably preferable if you plan to offer employee stock options, which could be classified as a second class of stock.
Customer: replied 5 years ago.
Thanks what is employee stock options?
My company is a one man show with no employess at the moment,and would not have more than 3-4 shareholders,and probably 3-4 employees.
Stock options are a form of compensation where an employee is granted the right for a certain period of ti e to purchase company stock at a preset price. If you qualify for s Corp status, and it sounds like you do, that is probably the way to go. As always, refer to local counsel to protect your rights in this matter before taking any action.
Loren and 6 other Business Law Specialists are ready to help you

Related Business Law Questions