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Forming a C-Corporation for a paint retail business.

Customer Question
Wondering what tax benefits or...
Forming a C-Corporation for a paint retail business. Wondering what tax benefits or other benefits there would be in making my wife a co-owner. She is currently working full time for a government contractor. She will be helping me with the business from time to time.
JA: Have any documents been drafted or filed?
Customer: Not yet.
JA: What state are you in?
Customer: Virginia
JA: Anything else you want the lawyer to know before I connect you?
Customer: Not neccesarily.
Submitted: 3 months ago.Category: Tax
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Answered in 2 minutes by:
8/1/2017
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 3 months ago
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
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Hi, my name is Mark. I will be happy to help you with your questions. Will you have other employees?

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Customer reply replied 3 months ago
I am planning on opening up shop in November. Yes, I will have an hourly operations manager, and three part-time hourly Sales Associates. I will be running the business full time. My wife has a Full time job with a govt. contractor. She can help with admin here and there. Wondering what advantages or disadvantages there are in making her a co-owner
Customer reply replied 3 months ago
What would you do? It has to be a c-corp because I am funding part of the business with my 401k from my previous employer.
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 3 months ago

There are no real advantages or disadvantages. With a C-Corporation you are subject to two levels of taxation. This income is first taxed at the corporate level and it is then taxed again when it is distributed to shareholders as dividends. You would want to try to manage the income of the C-Corporation.

As a corporation you would need to pay the officers a reasonable salary. So making your wife a shareholder/officer would allow you to spread the salary between two individuals. With a C-Corporation the IRS would be concerned that your salary would be too high.

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