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Last post 20 years ago by RDC. 6 replies replies.
Sub Chapter S
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RDC Offline
#1 Posted: Wed, Mar 3 2004, 4:22 AM EST
Joined: 01-21-2000
Posts: 5,874
Any business types out there that can give me the pros and cons of a Sub Chapter S company?
drnos Offline
#2 Posted: Wed, Mar 3 2004, 4:36 AM EST
Joined: 10-29-2003
Posts: 2,787
'Subchapter S' is an election that a corporation makes with the IRS. When the election is approved, the corporation no longer pays taxes on the federal level (California still makes them pay a gross receipts tax). The net income of the corporation is reported on a K-1 form to the shareholders, who pay the tax on their 1040 returns. There is much more than this (I have been to day-long seminars on the subject), but this is the gist of it.
00camper Offline
#3 Posted: Wed, Mar 3 2004, 5:48 AM EST
Joined: 07-11-2003
Posts: 2,326
The upside of electing to be an S corporation is simplicity. The corporation is you and you are the corporation.

The downside of electing to be an S corporation is that, by extension, YOUR FAMILY is the corporation and the corporation is YOUR FAMILY if you file a joint tax return. Also, with an S corporation you can't decide to pay yourself a stock dividend, or a cash dividend on your stock, instead of a wage, as a way to reduce your tax rate.
RDC Offline
#4 Posted: Wed, Mar 3 2004, 5:52 AM EST
Joined: 01-21-2000
Posts: 5,874
Crap, Two replies and already my head is spinning.

About the only thing I have heard about this is that at the end of the year whatever money is left you take as a profit/bonus.

Are there better alternatives to a Sub S?
drnos Offline
#5 Posted: Wed, Mar 3 2004, 7:39 AM EST
Joined: 10-29-2003
Posts: 2,787
RDC: I suggest an internet search on 'entity choice.' I just did and there are a lot of public articles from law firms and cpa offices going thru the benefits/drawbacks of C Corps, S Corps, LLCs, partnerships, and sole proprietorships. I would be happy to answer any specific questions you have, but a forum discussion on this would be deadly boring to most, and may involve confidential financial info that should not be posted in a public forum.

Feel free to email me at kbccpa at sbcglobal DOT net.
Buddha Daddy Offline
#6 Posted: Wed, Mar 3 2004, 1:12 PM EST
Joined: 01-25-2003
Posts: 2,999
RDC,
I just went through this and we opted for an LLC as opposed to an S Corp on the advise of an attorney. These entities I feel need to be understood in order for you to choose the one most appropriate for your situation. I know this doesn't answer your question but my point is to make sure you find which one best suits you, otherwise you could end up throwing away good money for something not required for your business.
RDC Offline
#7 Posted: Thu, Mar 4 2004, 4:35 AM EST
Joined: 01-21-2000
Posts: 5,874
Thanks to all for the input. I have done some web research... DAYUM there is a lot out there.

I have a broker and an attorney chomping at the bit to help.

Now all I have to do is convince the guy to sell his business. He is on the edge at the moment.

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