friend said i should make myself a at hire contractor and open a s corp and i will be able to keep more money... anyone???

Form an LLC. It's a lot cheaper and less BS on corporate minutes etc. Both treat profit as pass through income. S-Corp were more prevelant in the early 80's when there were more incentives. You can always go up from LLC to S-corp to C-corp but you can't go back easily.

Bottom line talk to your accountant and explain what you are trying to achieve. More importantly the LLC and the S-Corp offer some liability protection from your personal assets.

Best advice yet! My CPA actually suggested a S-Corp for my new business. He said unless I had a partner involved, the S-Corp was more beneficial than the LLC. Also, in Louisiana, he said the LLC leaves you a little more vulnerable than the S-Corp. Since I'm not a CPA, I'll have to take his word for it - That's what the hell I hired him for!

I have two observations. (1) Generally, unless the s corp or LLC have a long established business record, any finance company whether a bank or credit card or other is going to require that you sign personally for debt/loans, and will also require collateral, so the asset protection is minimal in the early years. (2) there has to be some regular income coming in at at a certain level in order for the costs and fees of keeping business records, etc. to offset the ability to save some money (generally some write-offs anc maybe getting to take some income as dividend rather then wage income). With an S Corp or LLC you will need separate bank account (fees); separate tax returns (costs); at some level you have to pay yourself wages and then there are the withholding taxes and forms to file and on and on. Make sure you measure the pros and cons in dollars, not generalized statements. I've seen too many people jump right into corporate formation and never earn enough money or take the time to handle the records correctly to ever take adavantage of any benefits. Also, many people form the corporation and don't follow the rules . . . then it was a pointless exercise.

A good accountant is key. Talk to more than one and look for one that offers ideas and asks you questions, not one that just takes info, puts it in a software systems and hands it back to you.

Good luck!

The IRS treats a LLC as a partnership, hence it must be two or more people, If it is one person only a LLC essentally is only a name and everything run through it will be done on the personal tax returns. With only one person in a LLC, from a IRS standpoint, it blends the business & personal assets and deductions into one, which I think makes it difficult for lenders to split what the two. With two or more partners, the LLC must file a tax return and each indiviual of the LLC must report that in there personal returns.

A LLC is more of a Real Estate holding company for multiple partners in my opinion. A contracting business is bettter served as a S-Corp. Both transfer all income to the personal tax return.

A LLC also allows constant splits on various deals, Say on 1 piece of property you and your partner can split it 90/10. On the nexy deal it can be 60/40. A S-Corp must be split per ownership in stock on every transaction. So if you have 3 partners, stock is owned 60-20-20, every transcation will be divided that way.

The best advice given it to talk to an accountant to see what best fits your needs.

I went from S to C and back to S three years ago. Expensive and timely to do. If I sell the business within 8 years of converting back I get taxed double.

This is a common misconception- that you can incorporate and claim some or all of the money received as a dividend instead of income- that way you dodge the 15% Social Security tax. You can try it- if you get caught, be prepared for fines and penalties.

S corp you must take the profits out of the company as income at the end of the year. C corp you can leave earnings or profit in the business in the corp account and not declare them as income profit etc.,

I am an accountant. Most of the stuff posted here is good stuff. With a partnership you have more tax planning ability and can move income/deductions around to be more beneficial to certain partners. What most people miss on the S-Corp is that most states have a tax for the S-Corp status. In Texas it is a franchise tax. Also different states have different S-Corp tax laws.

Oh hell, gotta run to an class. I'll post some more stuff when I get back and try to cover the gray areas. Feel free to ask more questions. I'll answer them best as I can - and you will not have to pay a CPA $60 an hour to talk on the phone.

Per my research it does appear that Louisana has a franchise tax of $1.50 per $1,000 of the first $300,000 of a taxpayer's taxable capital, and $3 per $1,000 of that amount over $300,000. But, there are exemptions. The IRS has been closing most of the benifits from the different types of entity classification. The best benefit is that an S-Corp is a flow through entity and a taxpayer can obtain liability protection.

In a sole proprietorship an owner is personally liable for the actions of his business. In an S-Corp the company is liable, and the owners loss is limited to their investment in the company.

One of the ideas Chris Sunkin is talking about is that a sole proprietorship has to pay 12.4% in self employment taxes (SS and Medicare X2), not 15%, on net income in addition to the federal income taxes. A lot of people, will set up small S-corps and not declare any wages, thereby escaping all self-employment taxes. This is not a good idea, but a lot of people seem to be getting away with it. DON'T DO IT IF YOU WANT TO SLEEP WELL AT NIGHT. But, there is a gray area. If you want to be aggressive I would suggest setting up an S-Corp and declaring a small amount of wages, in order to not make it a dead giveaway to the IRS. The rest of the net income will get passed through to you without any self employment taxes.

You still need to talk to a CPA in Louisana. Unfortunately the state tax laws have become so complex that a Louisana CPA would be better for your questions.

A variety of other factors should also go into your decision. Tax prep cost and payroll reports would cost around $800-2,000 per year for a small company (net income less than 50,000 and 2-10 employees) and from a small accounting firm. Not to mention the cost to get set up with an S-Corp status. You could probobly do the payroll reports yourself.

If you are not making a whole lot of money the cost of actually doing this might not outweigh the savings in tax.