Designate partner as employee, coowner, or incorporate?

[guest]

Any opinions on how husband/wife teams should get organized for business purposes? Are there tax advantages for designating one as an employee, the other as the owner, instead of joint ownership?

What about incorporation?

-Amy

 

[RichM]

My wife and I have been a S Corporation for 7 years,We are both employees of the corporation and drawer equal salaries each month. One advantage to being a S Corporation is that you can have the corporation pay and deduct from the Corp tax return 100% of all medical expenses incurred by the corpoation!s employees.However you need to be carefull as if you do it for yourselves,if you ever hire more employees you have to do it for them also. Another adavantage is that we pay ourselves a very small salary.This is what we then pay FICA (Social Security) taxes on.The other money that we take fronm the Corporation each month is considered a distribution which is taxed as ordinary income. This is similar to bank interst,stock dividends etc.Now
we do pay some fees to our home state each year but the advantages and savings in taxes outweigh that. One small advantage is that the corporation has to pay unemployment insurance for us.This could be very useful if your truck was destroyed in a accident and you had to wait for a new one or insurance settlement.Of course the unemployment folks would want you to locate another driving position,but if you told the potential company you would only be available for a couple of months they probably wouldn!t want to hire you..

 

[guest]

DENNIS HAS HIS SET UP AS INC. BECAUSE OF ANY LAW SUIT ,PEOPLE CAN ONLY SUE THE COMPANY AND NOT TAKE EVERYTHING ELSE YOU HAVE IF YOU HAVE ANY ?????? CALL US DENNIS WILL TALK TO YOU .1-313-388-9381 I HOPE YOU WILL DO WELL. ARE YOU DRIVING FOR SOME ONE OR ARE YOU BUYING A TRUCK .PLEASE JUST WATCH YOUR SELF . THANK YOU BRENDA AND DENNIS MI.

 

[RichM]

Dennis is 100% correct.The main reason for us going to a S Corporation was to minimize liability in case of a accident and resulting lawsuits. The nature of this business can create accidents by having to drive all night,trying to find a address in bad weather,the qualcomm beeping with "running late meassages" etc.Another reason is to have your corporation buy major purchases so if you go bankrupt your liability can also be kept to a minimum..One other thing is that after a while everyone and their brother wants to lend you money..

 

[LittleBigTruck]

Incorporating to save your assets in the event of a lawsuit will only work if you are not the driver. If you are an Owner/Operator and are involved in an accident, both your corporation and you personally can be sued.

 

[DriverLLC]

On the other hand you could form an llc (limited liability corporation). it has many tax and liability advantages and is very cost effective. check it out, i think it might be exactly what you are looking for.

 

[Fkatz]

i AM A TAX PREPARER AND EXPEDITER, CHECK OUT MY FORUM HERE ON TAXES.

YOUR QUESTION IS CONSIDERED ONE OF THE MOST ASKED IN ANY O/O SITUATION

1. SET UP A FICTIOUS COMPANY, PAY YOU WIFE OR PARTNER ON A 1099, AS A INDEPENTENT CONTRACTOR FOR YOU, YOU RECIEVE A 1099MISC FROM THE COMPANY AND YOU GIVE YOUR PARTNER A 1099MISC FOR HER PART OF THE GROSS THAT YOU MAKE.
2. YOU DO NOT WANT TO GIVE HIM/HER A W-2, THEN YOU HAVE TO PAY THE FEDERAL, STATE, SOCIAL SECURITY, AND MEDICARE TAX TO THE PROPER AUTHORITY IN A TIMELY MANNER, QUARTERLY OR MONTHY DEPENDING ON GROSS.

OR
3. YOU CAN MAKE OUT 2 SCH C'S ONE IN EACH NAME AND DEDUCT HALF OF THE EXPENSES ON EACH SCHEDULE.

AS FAR AS FORMING A CORPORATION IS CONCERNED, AT FIRST I WOULD NOT ADVISE IT FOR THE FOLLOWING REASONS:
DISADVANTAGES
1. LAWYERS ARE INVOLVED IN SETTING IT UP AND COSTLY FOR THE PAPERWORK
2. YOU ARE DOUBLE TAXED,
3. IRS SCRUTINIZES cORPORATIONS AND PARTNERSHIPS VERY CLOSELY
4. YOU MUST KEEP ACCURATE BOOKS.
5. mUST MAKE A PAYROLL, AND DRAW A SALARY EACH WEEK
6. PAY FED, STATE, AND SSN TAX
7. CORPORATE INSURANCE IS VERY EXPENSIVE
8, mAKE OUT w-2'S INSTEAD OF 1099 MISC'S

ADVANTAGES, THERE ARE ONLY A COUPLE

PROTECTION OF PERSONAL ASSETS, UNLESS YOU USE PERSONAL ASSETS TO SET UP THE CORP,
IN CASE OF FAILURE.
MEANING IF YOU USE YOUR HOUSE AS COLLATERAL, YOU WOULD LOSE IT.
OTHERWISE THE CORPORATION PROTECTS YOU FROM LOSING THE REST OF YOUR PERSONAL BELONGING IF YOU HAVE TO GO BANKRUPT AS A CORP.
INVESTMENT CAPITAL IS AVAILABLE TO CORPORATIONS FASTER THEN INDIVIDUAL.

THAT MAINLY IS THE MAIN ADVANTAGE OF A CORP. I DO NOT RECOMMEND IT AT FIRST, IF YOU GET LARGE ENOUGH WHERE YOU WANT TO EXPAND AND PUT ADDITIONAL VEHICLES ON THEN I WOULD INCORPORATE.

ANY OTHER QUESTIONS YOU CAN ASK FOR EVERYONE TO SEEK ON MY TAX FORUM
THANK YOU
FRANKLIN KATZ
FRANKS TAX AND BUSINESS SERVICES

 

[RichM]

Frank, you and I have never met and I respect your advice but I have to take issue with you on the 7 reasons you mentioned not to incorporate.
The total feel to set up my C Corpration was $99.00 and is fully deductible.
2 In a C Corp you do not pay taxes twice,the profit or loss is passed on to the shareholders and is included in their personal tax return.
3 The IRS has been know to srutinize Scedule C returns just as closely as a Corporation.
4 No matter how you run your operation,you should always keep accurate books.
5You do not have to do a weekly payroll.We do a monthly salary and a monthly distribution at the end of the month.
6 We pay quarterly taxs using form 941 and have done so for years.
7.I have found no difference in insurance costs.You mentioned Corporate insurance is high.What type of Insurance do you mean??

 

[RichM]

One other item,what!s the differnce in making out W2!S ,instead of a 1099.takes same amount of time. I would enjoy discussing these points by phone with you some time.I believe your number is posted,so if you can set a convient time I will give you a call.