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Lane
Lane, CFP, MBA, CRPS
Category: Finance
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Experience:  Providing Financial & Tax advice since 1986
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i wanted to do a corp-corp contract. is it better to open a

Resolved Question:

i wanted to do a corp-corp contract. is it better to open a s corp or c corp. my only intention not to do contracting on w2 is because i would save more on taxes by going corp-corp. please advise on the process.
Submitted: 1 year ago.
Category: Finance
Expert:  Lane replied 1 year ago.

NPVAdvisor :

Hi,

NPVAdvisor :

a C-corp is (like an irrevocable trust) a taxable entity - pay's taxes on all income at corporate rates on the corporate tax return ... here are the corporate rates for 2013

NPVAdvisor :

TAXABLE INCOME


RATE


Up to $50,00015%$50,001 – $75,00025%$75,001 – $100,00034%$100,001 – $335,00039%$335,001 – $10 million34%Over $10 million – $15 million35%Over $15 million – $18,333,33338%Over $18,333,33335%


ALTERNATIVE MINIMUM TAX*


20%

NPVAdvisor :

sorry formatting was terrible there but as (I hope) you can see, up to 50,000 is 15%, ... 50,000 to 75,000 is 25% ... 75,000 to 100,000 is 34% ... and on from there

NPVAdvisor :

Now, for S-Corps, LLCs, Partnership ans Sole proprietorships, those are all pass-through entities ... meaning that the companies don't pay taxes themselves ... the profits (or losses) are passed through to the owners (called members in an LLC, partners in a partnership, and shareholders in an S-Corp)

NPVAdvisor :

Sooo, because there is actually double taxation in C-Corp ( C-corp pays it's own taxes on profits .. and then if any dividends are paid to the owner/shareholder - that's taxedd AGAIN to the individual .....?

NPVAdvisor :

The S-corp PROBABLY makes more sense (No double taxation but you still have the liability protection of a Corporation)

NPVAdvisor :

It all really depends on ALL the things you'r trying to accomplish ... For example ... if you want to leave all of the excess IN the company and then have deductible fringe benefits like company car. etc paid (and deductible) by corporation .. the the C-Corp MIGHT make more sense

NPVAdvisor :

make sense?

NPVAdvisor :

Questions?

NPVAdvisor :

OK, still don't see you coming into the chat here ... I'll move us to the Question & Answer mode, ... Maye that will help

NPVAdvisor :

Let me know if you have questions .. but if this does give you enough information, I'd appreciate a positive feedback rating of 3 or better... (That's the only way they'll pay us here)

NPVAdvisor :

Let me know if you need more!

NPVAdvisor :

Lane

Expert:  Lane replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

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If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Lane replied 1 year ago.


Hi Apurva,

... just checking back in, as I never saw you come into the chat.

Let me know if you need more, or want to discuss this some more.

Lane

Customer: replied 1 year ago.


so say for instance, an individual is contracting and makes around 1500-2000 usd per day. whats the best way to save taxes on the net income. which corp works the best?

Expert:  Lane replied 1 year ago.

The s-corp would work the best here.

That way you won't be taxed on any profits twice, as you would with the dividends to yourself coming out of the c-corp.

Lane
Customer: replied 1 year ago.


what is the process to set up the s corp? what are the fees involved?

Expert:  Lane replied 1 year ago.

If you'll tell me what state you're in, I can get the necceassary docs for you.

The filing fee depends on the state.

All secretaries of state, in each state, have a little different process (any time you set up a corporation of any kind you'll be fling with the secretary of state in your state ... business formatrion is a state law issue)



Generally these are the steps:


  • Draw up articles of incorporation, by-laws, and various resolutions,
  • Incorporate the business as a corporation in the state where the company will conduct the bulk of its business,
  • Verify that the corporation meets the eligibility for being an S-Corp ...
  • Notify the IRS of its intention to be taxed as an S-Corporation by filing IRS Form 2553 no later than the 15th day of the third month following its date of incorporation

  • Here's a piece on the eligibility requirements for S-Corp

    eligibility criteria for being an S-Corporation,


    On filing that 2553 with IRS?


    IRS Form 2553, Election by a Small Business Corporation (instructions, PDF form) must be filed:
    • Before the 16th day of the 3rd month of the corporation's tax year,
    • Before the 15th day of the 2nd month of a tax year lasting 2-1/2 months or less,
    • At any time during the tax year before the tax year the election is to take effect,
    • At any time after these deadlines if the corporation follows special rules for making a late S-corporation election.

     

     

    Now, if you'll tell me your state, I'll look up the fees and see if I can link the forms for you here.

     

    Lane

     

    Customer: replied 1 year ago.


    I m in New Jersey

    Expert:  Lane replied 1 year ago.


    Hi,

    First, here's NJ's online registration system ... it will probably lead you through the process: https://www.state.nj.us/cgi-bin/treasury/revenue/dcr/filing/page1.cgi



    But here's EVERYTHING you need to do (Note in paragraph 4 that the filing fee is $125):

    Check business name availability to ensure that your name for your New Jersey S corporation is distinguishable from other entities that operate in the state. You must select a business name that does not have a similarity to existing businesses registered with the New Jersey Division of Revenue. Call the New Jersey Division of Revenue at(NNN) NNN-NNNNto confirm name availability. Add words like "corporation," "incorporated" or "company" to the legal name of a New Jersey S corporation.

    Recruit at least one director to serve on the New Jersey S corporation's board of directors. Directors does not have to live in the state, but each director must have reached at least 18 years of age. Directors do not have to own shares of the business. They have the responsibility of governing the company's business activities, allocating company resources and selecting officers to manage the day-to-day affairs.

    Complete a certificate of incorporation. Print a fill-in-the-blank certificate of incorporation from the New Jersey Division of Revenue website, or call(NNN) NNN-NNNNto have the certificate sent to you by mail. List the legal name and address of your New Jersey S corporation, as well as the number of shares the company has the authorization to issue to potential investors. State the name and address of the company's registered agent. The agent may be a person or business that agrees to accept legal documents on behalf of the company. List the name and address of each incorporator responsible for filing the certificate of incorporation with the Division of Revenue. Indicate the purpose for beginning the company and the date when the company will end its existence, unless it will have an unlimited life. Include the number of directors who will serve on the board.

    File the certificate of incorporation. Submit it electronically using the Division of Revenue website, or file the certificate of incorporation in person at 200 Riverview Plaza, Trenton, New JerseyNNN-NN-NNNN Mail the completed certificate of incorporation, if that serves as a more feasible option. It costs $125 to file a certificate of incorporation.

    Compose bylaws to establish rules and regulations for operating your S corporation. New Jersey does not offer specific rules regarding the content of an S corporation's bylaws. Include information in the bylaws such as the date and time of company meetings, criteria for selecting new directors and the compensation due to the company's officers. Maintain the bylaws at the company's primary office location, since there is no requirement to file the bylaws with any New Jersey government agency.

    Print Form 2553 from the IRS website, or call 800-TAX-FORM to have it sent to you by mail. Provide information about your New Jersey S corporation such as its legal name and address, along with the number of employees who work for the company. Offer an explanation of the company's business activities and include the signature of every shareholder. Form 2553 must get filed within 75 days of filing the certificate of incorporation with the state Division of Revenue. Fax Form 2553 to(NNN) NNN-NNNNor mail Form 2553 to the Department of Treasury, IRS, Cincinnati, Ohio 45999.

    Here's an excellent article:http://www.ehow.com/how_8396541_form-corp-new-jersey.html

    Hope this helps,

    Lane

    Lane, CFP, MBA, CRPS
    Category: Finance
    Satisfied Customers: 3647
    Experience: Providing Financial & Tax advice since 1986
    Lane and 2 other Finance Specialists are ready to help you
    Expert:  Lane replied 12 months ago.
    Hi apurva,


    I'm just following up with you to see how everything is going.

    If you'd like to work with ME again, just say FOR LANE ONLY at the beginning of your next question.

    Either way, thanks for using us.
    Lane

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