We believe the term "S" corporation to be the most widely misused of all IRS elections So lets begin with the basics. The business model for the purpose of this discussion will be a privately held corporation that generates less than $10 million dollars in annual sales We will also discuss the type of entity we should use for operating our business, what an "S" Corporation is, and when a standard Private Corporation should be converted to an "S" Corporation. More specifically, how that business will benefit by operating in Nevada and Wyoming.
Understand what is S means you take your C corporation which is what all privately held corporations initially are and you tell IRS you want it taxed on your personal social security number. Then the most commonly misunderstood term is "double taxation". Double Taxation exists when in the operator of their private corporation forgets to pay himself Possible? Conceivable? Personally, I have never met this a business owner that forgot to pay himself? I have certainly met a lot of accountants who think their clients are that "stupid" That is why I have said for many years that "S" stands for stupid. Did I mention that the audit rate for S corporations and the similarly structured "sole proprietorships" are exponentially higher than all other IRS elections?
"S" Corporations have two primary uses, pass through income and for the mom and pop corner store.
If you elect to file as an "S" Corporation there is no reason to file in Nevada When you file the 2553, the IRS will share that information with your state (and every sub government division) and visa versa, therefore all the benefits of Nevada have been lost. Understand that when you decide to be an "S" Corporation you are saying that the business is you!
Personally my experience has been that all operating businesses should be C Corporations except when pass through income or partnerships are required. "When should I file in Nevada"? is actually a more complicated question. Most businesses will not pass the test of the local states revenue officers requirements.
Example's brick and mortar retail stores must file in the state they operate. Marketing, consulting, fulfillment, credit, any online or internet based, etc. maybe Wyoming or Nevada based companies.
We hope this help a little please feel free to call, we are always here.
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