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Shane-CPA
Shane-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 265
Experience:  Shane Northrop is a Certified Public Accountant, Personal Financial Specialist and a Chartered Global Management Accountant
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I have a new business, established as an S-Corp in the area

Resolved Question:

I have a new business, established as an S-Corp in the area of IT (Computers). Am I able to hire my partner as an employee in my business? What about other friends or family members? I have potentially found a couple of positions that I can hire them under a Corp-to-Corp situation with another Business Vendor.
Submitted: 1 year ago.
Category: Tax
Expert:  Shane-CPA replied 1 year ago.

Shane-CPA :

Hello...my name is XXXXX XXXXX I am a Certified Public Accountant. I look forward to assisting you with your tax question.

Customer:

thank you Shane

Shane-CPA :

As owner of an S-Corporation, there is no limit on who you can hire to work for your company...that includes being able to hire a partner.

Customer:

Great!

Shane-CPA :

The main requirement is that whoever you hire, the pay must be reasonable for the work being performed.

Customer:

I have a potential opportunity to hire him as an IT Professional, under a corp-to-corp situation. That is, they would be my employee but I have found another vendor who actually has the contract with the hiring company. They are willing to work with me corp-to-corp.

Customer:

I have two potential people - one is my partner, another is a friend. They are both looking for positions (hit by sequestration) and they are both very competent and seasoned in the field.

Customer:

Now, that is the good news. The challenge for me is that this is a new business for me and all of this is happening fairly quickly. (smile)

Shane-CPA :

Great! The advantage of being a shareholder in an S-Corporation is that you can also be an employee in the company. This isn't the case for an LLC taxed as a Partnership.

Customer:

I have not hired an employee before (my previous business was as a sole proprietor) and I have not done a corp-to-corp before.

Customer:

I am thinking I need to meet with a CPA? Tax Attorney? Business Expert - to help me set up the necessary structure to move forward.

Shane-CPA :

There are several payroll services you can use for payroll. You may want to get a quote from a few of them to compare the prices.

Customer:

Can QuickBooks be used for payroll?

Shane-CPA :

Yes...I would recommend looking for either a CPA or Tax Attorney who offers a free consultation so you aren't having to spend money meeting with someone the first time.

Shane-CPA :

Yes QuickBooks is a very common choice for payroll.

Customer:

I have just purchased QuickBooks but have not yet set it up for my business. I am thinking that for the 1st year I would probably ask my CPA / office admin (part-time) to set this up for me - so that a) it would be set up correctly and b) I could learn along the way

Shane-CPA :

Yes...that is a good idea...just make sure the price isn't too high since QuickBooks also offers support for this.

Customer:

ok - thank you

Shane-CPA :

You're very welcome! Thank you for allowing me to assist you. Thank you also for using Just Answer and I hope you have a great night!

Customer:

one other question!

Shane-CPA :

sure...

Customer:

Where can I get a list of what items / expenses my company covers (can cover) for my employees and what items / expenses they must cover? E.g. Life Insurance, Health Insurance, Travel expenses, etc...

Shane-CPA :

There isn't a defined list provided by the IRS, mainly because there isn't a requirement that the company pay for any of these costs (with the exception of ObamaCare going into effect for health insurance premiums). Other than health insurance changes, you can cover as much or as little employee expenses as you want. However, some expenses the employer pays for may not be fully tax deductible...such as per diem above the rates published each year...

Customer:

Ok - thank you. Is there a list of what items that the employer pays for that are fully / partially tax deductible?

Customer:

For example, one of the positions is out of state. Is it acceptable for either the employer or the employee to pay for the travel and housing costs?

Shane-CPA :

Most expenses the employer pays for are tax-deductible to the employer. There are some rules with paying for employee expenses such as "fringe benefits" that can allow for a tax deduction to the employer without it being included as taxable income to the employee. I would recommend looking into "fringe benefits" and the requirements for these.

Shane-CPA :

Yes...the employer can cover the cost of travel and lodging while an employee is working at another location.

Customer:

Ah - thank you. Where can I find this information?

Customer:

Do all of these decisions need to be made day one, or can I add / adjust in the upcoming weeks IF this corp-to-corp opportunity comes to fruition?

Shane-CPA :

Publication 15-B is a good place to start as published by the IRS...the web address is http://www.irs.gov/publications/p15b/ar02.html

Shane-CPA :

You can always decide to add or end fringe benefits at any time at the employer's discretion.

Customer:

thank you - for both answers

Shane-CPA :

You're very welcome! Thank you!

Customer:

Ok, so first step I need to confirm that the corp-to-corp situation is a go. Then I need to hire my partner as an employee. Then I need to set up Payroll (I already have the bank accounts in place), and lastly I need to hire a CPA.

Customer:

Any other first steps you would recommend - this week? (smile)

Shane-CPA :

Correct...although you may want to hire a CPA as the 2nd step...they will be able to guide you into any additional steps that are necessary or that could potentially save you money.

Customer:

thank you Shane. I have two names of potential CPAs that I plan to contact tomorrow.

Shane-CPA :

Sounds Great! Please let me know if I can provide you with any additional assistance in the future!

Customer:

Thank you very much Shane

Customer:

I am glad that you were available to help me today

Shane-CPA :

You're very welcome! Have a great night!

Customer:

you too. bye

Shane-CPA :

Bye =)

Shane-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 265
Experience: Shane Northrop is a Certified Public Accountant, Personal Financial Specialist and a Chartered Global Management Accountant
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