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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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I currently have a corporation in the HVAC industry. I am

Customer Question

I currently have a corporation in the HVAC industry. I am purchasing another company that does appliance repair. My question is, is it better to set up a separate corporation for this new company, with a new tax ID, etc., or roll it into my current corporation?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

That mainly depends on your circumstances and intention.
If these are C-corporations and you expect one corporation to generate income while another might realize a loss - you might want to combine both corporations and reduce total taxable income.
If you are thinking to sell one corporation in future or possibly sell some shares to another shareholder - investor or partner - you might want to keep these corporations separated.

What you need to consider - if you keep separate accounting, separated tax filing and separated payroll - that will result mor eoverhead - so - if you are looking for ways to save on expenses - you better to combine these operations.

Customer: replied 1 year ago.

They are both S-Corporations and two separate sets of books will be kept due to the fact that they are distinct businesses. Even still, do you think it is best to have them under one corporation?

Expert:  Lev replied 1 year ago.

Again - that is mainly your business decision...

Even these are distinct businesses - you still may combine then under the umbrella of ONE corporation.

Advantages of doing so will be

- less accounting overhead

- ONE payroll and one employment tax return

- if one business realizes a loss and another is profitable - they will offset each other.

- one corporate income tax return instead of two

Disadvantages would be if

- if you will sell one business - it would be easier to close that S-corporation and sell assets

- if you will invite a partner or an investment to ONE business line - you would simply sell shares of THAT corporation and would not mess with combined accounting

- liability issues... if you expect a claim against your business - separate entities would be better protection.

So - there are advantages and disadvantages in both ways - and there is no a simple answer.

Thus - keeping two corporations will cost you a little more - and that is OK if you have additional value from that cost.

If however - you feel that there is no or a very little value - I see no reason to keep two corporations.

Expert:  Lev replied 1 year ago.

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