I am starting a house flipping business in Texas. My number one goal for the first 3 years is to retain all earnings in the company to build operating capital and so will make no distributions. I am curious if it is legal for federal income tax purposes to split the company into several entities taxed as c-corps, each making $50,000 or less to keep the tax bracket low. So let's say, I earn $150,000 one year, split into 3 separate c-corps. $50,000 x 15% x 3 = $22,500 in corporate taxes. Is this legal?
At some point, I would of course want to begin paying myself profits from the corporations. Is it possible to convert those c-corps to entities taxed as s-corps in the future? Would doing this cause me to have to pay back taxes on all the past retained earnings or would I only have to pay taxes on future salaries and dividends which pass through from that point forward? Thanks!