Anyone a sub chapter S corporation?

[D]

Do you pay yourself and your wife out of the business? Is your and your spouses name on the ownership? Just curious if anyone is doing this. Had a friend doing it and I was able to help him do a few things different the next year. If not....no biggy won't spend a lot of time on it.

 

[jcsjr]

Short answer yes

First, have a good CPA to assist you with all the financial details.

Secondly, yes, you take a check or 'drawings' (usually referred to as officers drawings.)

Taxes are paid against the total of those drawings, although, being a sub-S corp all officers receive a schedule K-1 (like a 1099, gives a total amount that the officers drew, if the corporation operates at a loss, then it is a negative amount and goes against any taxes paid by the officer in other investments or other tax liabilities) so it can either raise or lower ones taxable income.

Ultimately what you should do is run everything through the corporation, the officers 'loan' money to the company at times for it to operate and likewise the officers receive checks as income. The officers loans and drawings become like a slush fund that the CPA uses to raise/reduce the officers overall tax liability since the S corp 'passes through' any tax liabilities or losses to the officers, relative to the percentage that each officer holds in stock (or ownership.)

A 'C' corp operates totally differently and is generally more appropriate for much larger income entities. An LLC is another option, although here in CA the state licensing board will not license an LLC. Additionally, the LLC does not have the track record (about 20 years versus over something like 200 years) in the US (and English) court system so there is an imense amount of legal precedence for the Corporation structure.

Hopefully I did not overwhelm you-

 

[D]

No I was offering help. But thanks.

Here is what I was waiting to see if anyone paid their spouse and their self. I caught a friend that also had his spouse on the chapter S. First don't pay your self and your wife because you get charged 2x the social security. No reason to do it since you probably will never see it. Second since it's an S it's figured on your personal taxes if you have your wife on the books too it increases your social security liability double. So it's not good to have both of you on a chapter S corp.

Not a tax guy but found many people doing this and it doesn't make sense.

 

[jcsjr]

Social Security charges

Generally speaking, you don't get charged social security taxes through a Sub S unless you are part of a company payroll system.

If officers are simply taking drawings, you do not get hit with social security taxes, since it is a check drawn from the corp., hence the reason you get the Schedule K-1 from the corporation for earnings (and shifting the tax liability for that income from the corporation to you, the officer personally.)

You actually have to include any payments to social security in your personal tax filings (separate from the corporations tax return) to ensure you are paying into the social security system and have it counted towards your total lifetime contribution.

Understand about the long term availability of social security though-

 

[trimmmed]

Listing one of the two, (husband or wife) as a passive investor has it's advantages. Primarily, the passive investor does not pay double social security.

Having multiple corporations also has some advantages! (insurance wise)

 

[Aedan]

If you have time to do some business then don't make investment in stocks as you will lose in the end and it is also out of your control and in my views the out of control business will never get you profits always and the stock market business has no basis and it all about speculations and you are always on the edge.