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 ezcpa Your Own Question
ezcpa, CPA
Category: Tax
Satisfied Customers: 171
Experience:  Certified Public Accountant
Type Your Tax Question Here...
ezcpa is online now
A new question is answered every 9 seconds

My friend in California and I in Washington state plan to establish

Resolved Question:

My friend in California and I in Washington state plan to establish a company here in Washington. How could we do this? He wants his 1099 salary for Jan and February to be reflected under the-soon-to-be company. Could we do this? What is the best plan for business tax under this arrangment to take advantage of government's incentives for small to medium busisnness?
Submitted: 4 years ago.
Category: Tax
Expert:  ezcpa replied 4 years ago.

Hello. Thank you for using Just Answer.


You have several options for establishing a company with another person. Here is a summary of your options:

1. Joint Venture/Sole proprietorship - Usually no formal agreement, business income and expenses are reported on each of your form 1040/Schedule C according to your percent ownership of the venture.

2. C-Corporation - Report income and expenses on form 1120. The corporation pays its own tax and owners are taxed on income they take out (dividends). Pros are legal protection, good if you plan to grow and company and sell it, Cons are double tax to small business owners

3. S-Corporation - Report income and expenses on form 1120S. Similar to a C-Corp but instead of paying its own tax, taxable income flows to each shareholders form 1040.

4. Partnership - Reports on form 1065. Income flows to partners for tax. Allows for special allocations of income if you and your friend need more flexibility on how to split taxable income

5. LLC - Limited liability company provide legal protection so you won't lose more than you have invested in the company. You can "check the box" as to how you want to be treated for tax purposes. (Usually 1120-S or 1065)


This is a quick summary. For more detail see,,id=98359,00.html


For most of the businesses, you will need to apply for a federal tax id number (available on the IRS website). An S-Corp has a separate application. You will need an attorney to prepare a LLC because every state is a little different.


As far as the 1099 issue - it depends on the entity you choose. 1099s are for businesses to report services provided. If you go the C-Corp or S-Corp route, you will probably need to pay wages for these services provided, so you will need to do payroll taxes and file forms W-2 vs. 1099. If you go the partnership/LLC route, you can just take the services as member draws instead of 1099s.


Also, you will need to file your business in your state of Washington. There is usually a registration form to record the corporate stock or LLC, and annual reports to file.


I know this is a lot of information. Please let me know if you have additional questions or click to accept this answer.

Customer: replied 4 years ago.
Thank you for your good answers.
If you don't mind, I wish to zoom in to the subject one by one. First the 1099. 1099 payments for Jan and Feb 2012 were already made in his name. Could we incorporate this amounts to the about to be established company?
Expert:  ezcpa replied 4 years ago.



Amounts paid in 2012 won't be due to file 1099s until January 2013, so I doubt you filed anything with IRS yet.


Any payments you made to your friend for services can be reclassed as needed before you file any tax returns in 2012, so YES you can incorporate them into the new company.


If you mean 2011 payments that were filed as 1099s inXXXXXis for him to report them as income on his 1040/Schedule C then you can start 2012 fresh with your new business entity.


Customer: replied 4 years ago.

Thank you for prompt reply.

Sorry I was not specific. Jan & Feb 2012 payments made to the name of my friend by his company as 1099: Could we incorporate this earning as income for 2012 by our soon to be registered company?
Expert:  ezcpa replied 4 years ago.
Yes, you can put those earnings as income on your new company.
Expert:  ezcpa replied 4 years ago.

I should add that if the 1099 reported in your friend's social security number you should have it changed to your new company's federal tax id number (when you get it).

Expert:  ezcpa replied 4 years ago.

Did you receive all the information you needed on this question?


Please let me know if you need additional information or accept this answer so I may receive credit. Thank you!

ezcpa, CPA
Category: Tax
Satisfied Customers: 171
Experience: Certified Public Accountant
ezcpa and other Tax Specialists are ready to help you
Customer: replied 4 years ago.
Thank you for diligence,promptness, persistence and willingness to answer.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Previous | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA

Meet The Experts:

  • Wallstreet Esq.

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    10 years experience
< Last | Next >
  • Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    10 years experience
  • Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • Richard's Avatar


    Tax Attorney

    Satisfied Customers:

    29 years of experience as a tax, real estate, and business attorney.
  • Robin D.'s Avatar

    Robin D.

    Senior Tax Advisor 4

    Satisfied Customers:

    15years with H & R Block. Divisional leader, Instructor
  • Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
  • jgordosea's Avatar


    Enrolled Agent

    Satisfied Customers:

    I've prepared all types of taxes since 1987.
  • R. Klein, EA's Avatar

    R. Klein, EA

    Enrolled Agent

    Satisfied Customers:

    Over 20 Years experience