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Old 04-02-2018, 02:44 PM   #1
Hawkpuppy 1
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Default How to start a small business??

Wife and I are looking to start a small side business. What all do we need to do to be "legal"? We will have no employees, just her and I. Seems like all we would need is a State Sales Tax Permit and maybe an EIN?
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Old 04-02-2018, 02:54 PM   #2
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Yes and a DBA from the county.
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Old 04-02-2018, 02:59 PM   #3
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Wife and I are looking to start a small side business. What all do we need to do to be "legal"? We will have no employees, just her and I. Seems like all we would need is a State Sales Tax Permit and maybe an EIN?
Technically you donít need any of that to operate a business legally, just report the income and expenses on your personal taxes. There are some tax and legal benefits to forming an entity of some sort, but depending upon the size of the bizand with no employees it may not be worth the expense/hassle to form an entity and keep separate books
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Old 04-02-2018, 03:34 PM   #4
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I would inc. or LLC whatever you're going to do asap. If not you'll be paying killer taxes.
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Old 04-02-2018, 04:31 PM   #5
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I would inc. or LLC whatever you're going to do asap. If not you'll be paying killer taxes.
???

How so? Please explain.

How does incorporating allow you to pay less taxes?
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Old 04-02-2018, 04:34 PM   #6
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I would also go the LLC route. It is just a little better insulation than a DBA for lawsuits.
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Old 04-02-2018, 04:36 PM   #7
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I would inc. or LLC whatever you're going to do asap. If not you'll be paying killer taxes.
I didn't do this and it's not costing me any extra!
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Old 04-02-2018, 04:43 PM   #8
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I've started a few businesses and the first thing you do is let somebody kick you in the taint five or six times. That'll prepare you better for what lies ahead.

Seriously though, depending on the type of business you're going into it may not be necessary to go through all the headache you're considering. Just go to the County Clerk and file for a DBA. If your business grows, you can always incorporate later. You may need a sales tax certificate for selling items to the end user, I don't know about that. The purpose of incorporation is simply to provide a veil between the personal and the corporate....financially and liability-wise. It's not always necessary, but sometimes prudent.
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Old 04-02-2018, 04:48 PM   #9
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i have a LLC. Its just a layer of protections against lawsuits, all the income from the company goes to my personal return. I had a attorney set it up. There are some perks to having the LLC.
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Old 04-02-2018, 04:52 PM   #10
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What exactly is your business going to be doing?

If there is any liability to it, I would suggest incorporating. Otherwise, you could be sued, and someone could go after your personal assets. If the liability is low, I would save your money and set up shop as a sole proprietorship and incorporate once, you start making money.

Incorporating can be expensive and you'll most likely have to hire an accountant to file your taxes.
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Old 04-02-2018, 04:53 PM   #11
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Having the LLC allows you to file as a sub chapter s corp and take distributions as a member
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Old 04-02-2018, 05:33 PM   #12
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Originally Posted by Burnadell View Post
???

How so? Please explain.

How does incorporating allow you to pay less taxes?
DBA will kill you tax wise. I've been there done that! As a corporation you're looked at as an employee or board member not an owner... it's a huge difference. Somewhere around 10 to 15 percent...plus it protects your personal assets.
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Old 04-02-2018, 05:47 PM   #13
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What ever your doing you might consider some liability insurance
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Old 04-02-2018, 05:57 PM   #14
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Really depends on the business you will be doing. If your gonna just start small selling a product online(Etsy) the. I would just get going, get your sales tax set up. The one thing I would do is set up completely different books for the company and your personal books. Start a checking account, credit card and any other thing you will need to run the business separate. This way you can truly track your business and see what you are spending and making. Also your accountant can look at your statements and get most he will need to do a simple return for you.
Would only set up an LLC once you get going. Consult an accountant before you set up Corp as their are benefits from a tax stand point that need to be considered.


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Old 04-02-2018, 06:00 PM   #15
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I hope to be starting a business soon. Just me and no employees. Is sole proprietor the best for this? I just need a county DBA and a sales tax permit right?
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Old 04-02-2018, 06:17 PM   #16
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DBA definitely, it's easy to setup. Cost about $10 at the county office. Sales tax permit is a maybe. Are you reselling a product that you bought wholesale or are you making a product and selling. What you need is very dependent on what you will be doing.
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Old 04-02-2018, 06:21 PM   #17
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Dave a lot of what you need will depend on what the business will be offering product or service. LLC's can be a great thing but not necessary
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Old 04-02-2018, 06:23 PM   #18
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I went DBA. Depending on what you do and how much you bring in makes a difference.
I carry a specialty liability policy that matches the type of work I do.

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Old 04-02-2018, 09:10 PM   #19
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Quote:
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DBA will kill you tax wise. I've been there done that! As a corporation you're looked at as an employee or board member not an owner... it's a huge difference. Somewhere around 10 to 15 percent...plus it protects your personal assets.
I don't understand your explanation. You own a corporation, but you are "looked at" as an employee? So the corporation pays the corporate taxes and you pay taxes on your withdrawals as a salaried employee?


I won't get into an argument with you on here, but your statement, as a blanket statement, is not correct. Many corporations elect to be taxed as a Sub Chapter S corporation due to the tax advantages. Sub S corps are not taxed as corporations but rather the revenues and expenses flow through to the individual owner(s) and are taxed as individuals.

You can also incur double taxation with a C corporation by dividending out excess profits.

As Curt stated the primary reason folks set up LLC's is for liability protection.
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Old 04-02-2018, 09:11 PM   #20
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I hope a CPA will jump on here and explain how my thinking is wrong.
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Old 04-02-2018, 09:17 PM   #21
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I hope a CPA will jump on here and explain how my thinking is wrong.


Not a CPA but Iím sure youíre wrong.




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Old 04-02-2018, 09:20 PM   #22
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The new tax law changed things some for some cases.
But LLC’s are pass through corporations. You file one tax return which includes the corporation.
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Old 04-02-2018, 09:33 PM   #23
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Not a CPA but Iím sure youíre wrong.




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I may be but please explain how.

My point is that a blanket statement can not cover all bases.
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Old 04-02-2018, 09:45 PM   #24
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I hope a CPA will jump on here and explain how my thinking is wrong.
Not wrong. I was in the construction business for 15 years and that description is spot on.
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Old 04-02-2018, 09:47 PM   #25
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Quote:
Originally Posted by Mexico View Post
DBA will kill you tax wise. I've been there done that! As a corporation you're looked at as an employee or board member not an owner... it's a huge difference. Somewhere around 10 to 15 percent...plus it protects your personal assets.
I don't see this as being correct^^^^^

Quote:
Originally Posted by Burnadell View Post
I don't understand your explanation. You own a corporation, but you are "looked at" as an employee? So the corporation pays the corporate taxes and you pay taxes on your withdrawals as a salaried employee?


I won't get into an argument with you on here, but your statement, as a blanket statement, is not correct. Many corporations elect to be taxed as a Sub Chapter S corporation due to the tax advantages. Sub S corps are not taxed as corporations but rather the revenues and expenses flow through to the individual owner(s) and are taxed as individuals.

You can also incur double taxation with a C corporation by dividending out excess profits.

As Curt stated the primary reason folks set up LLC's is for liability protection.
Burnadell, this is correct. My business is set up as an S corp. I pay myself a salary and then take retained earnings out a couple times a year. I am taxed on the income I take out of the company. Being an S corp over an LLC is I don't pay corporate taxes, keeps me from getting double taxes. There are many more advantages, as I'm sure you know.

My advice to OP is to talk to your CPA and decide which way is best for you. Then pay the $500 dollars to set up your company... Just my .02 worth
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Old 04-02-2018, 09:52 PM   #26
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I think based on what we are going to be doing, a DBA and Sales a Tax Permit will be where we start. As we grow, it will probably turn into an LLC
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Old 04-02-2018, 09:57 PM   #27
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It would be a good idea for you to consult a CPA to learn what kind of records you need to be keeping for tax purposes.

Also, many Junior Colleges have a Small Business Development Center that can offer information and services that can be helpful.

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Old 04-02-2018, 10:25 PM   #28
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Quote:
Originally Posted by Burnadell View Post
I don't understand your explanation. You own a corporation, but you are "looked at" as an employee? So the corporation pays the corporate taxes and you pay taxes on your withdrawals as a salaried employee?


I won't get into an argument with you on here, but your statement, as a blanket statement, is not correct. Many corporations elect to be taxed as a Sub Chapter S corporation due to the tax advantages. Sub S corps are not taxed as corporations but rather the revenues and expenses flow through to the individual owner(s) and are taxed as individuals.

You can also incur double taxation with a C corporation by dividending out excess profits.

As Curt stated the primary reason folks set up LLC's is for liability protection.
What I've said is the truth. I've owned 3 companies over the last 20 yeard, a DBA, a corporation and now a LLC. I turned my first company into a Corporation as fast as I could after paying 38 percent taxes as a DBA under the advice of my accountant. The next year as a corporation my taxes were around 25 percent.

A corporation is it's own identity. Even if you're an owner of the corp. or majority stock holder you are still looked at like an employee of said corp. even if you're the president. Yes I personally take a salary and draws as I wish, the company files it's own taxes and I file separately individually.
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Old 04-02-2018, 10:30 PM   #29
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Illegals have been avoiding taxes and get big returns for years, just do what they do.
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Old 04-02-2018, 11:36 PM   #30
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Can someone start a hunting guide service or cattle business as a side job? I have a friend who owes the government every year with no write offs.


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Old 04-03-2018, 03:04 AM   #31
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I hope a CPA will jump on here and explain how my thinking is wrong.


Don't have a clue but I'll have to say you're wrong. Just because I can.



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Old 04-03-2018, 06:29 AM   #32
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Quote:
Originally Posted by Mexico View Post
What I've said is the truth. I've owned 3 companies over the last 20 yeard, a DBA, a corporation and now a LLC. I turned my first company into a Corporation as fast as I could after paying 38 percent taxes as a DBA under the advice of my accountant. The next year as a corporation my taxes were around 25 percent.

A corporation is it's own identity. Even if you're an owner of the corp. or majority stock holder you are still looked at like an employee of said corp. even if you're the president. Yes I personally take a salary and draws as I wish, the company files it's own taxes and I file separately individually.
I think his point was you are going to pay the taxes regardless. Your tax rate fell to 25% when you re-structured as a Corp, but that was just your personal taxes based on your income. The Corp still had to file taxes based on its revenue, Iím guessinf that was taxed at a rate of 25% or more... would need to know the actual income and Corp rev, but I bet you paid the same or more in taxes.
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Old 04-03-2018, 07:08 AM   #33
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I think his point was you are going to pay the taxes regardless. Your tax rate fell to 25% when you re-structured as a Corp, but that was just your personal taxes based on your income. The Corp still had to file taxes based on its revenue, Iím guessinf that was taxed at a rate of 25% or more... would need to know the actual income and Corp rev, but I bet you paid the same or more in taxes.
Actually no, I'm not going to put my personal finances up but my savings were dramatic as a whole. I have a great accountant.
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Old 04-03-2018, 07:28 AM   #34
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Originally Posted by Burnadell View Post
I hope a CPA will jump on here and explain how my thinking is wrong.
I'm not a CPA but will gladly explain why.

#1: Your explanation did not have any grumpiness.

#2 Zero mention of an arse whooping

I think I can speak for the rest of the class in saying we would appreciate you not being so soft in your future banters.

Burn-a-Dell is saying the Corp. is paying Corp taxes on profits as well as payroll taxes, hence the double taxation. But again, I ain't a CPA.

To the OP. How you set up your business venture should be determined on what type of business.
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Old 04-03-2018, 08:24 AM   #35
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Best advice I can give is to keep good books. I use Quickbooks Online. Not the desktop version, but Quickbooks Online.

I've had four business entities setup and having Quickbooks Online keep track of all my expenses and mileage helps out big time come tax season. You can add your accountant to have access and they can login and prepare your taxes in no time.

Also use the app to snap pics of receipts at the time of purchase. If I wait to add them all later I find that I forget to do them.

They run specials all the time and it's pretty cheap on a monthly basis

https://quickbooks.intuit.com/pricing/
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Old 04-03-2018, 11:24 AM   #36
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You could always start making duck calls. And call it Carter's Calls.

The fish are biting, and there's hogs to be kilt. Gotta go!
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Old 04-03-2018, 11:39 AM   #37
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Can someone start a hunting guide service or cattle business as a side job? I have a friend who owes the government every year with no write offs.


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Of course...I run a guide service, tracking dog service and a kennel.

Those expenses can be deducted but it's against the income from the outfitting, tracking services and puppy sales that is reported.

To start my business, I filed the name with the county clerk (the county in which my business is located) and opened a small business checking account with a local bank. If you don't have employees you don't need a tax IEN.

You can always change the business structure later (set it up as an LLC.)
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Old 04-03-2018, 12:27 PM   #38
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People really over think starting a business..... you can go to a CPA or county tax office and have 10 companies filed before 5 o'clock today. It really is pretty simple, good luck and have fun with it.
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Old 04-03-2018, 12:38 PM   #39
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Quote:
Originally Posted by Mexico View Post
DBA will kill you tax wise. I've been there done that! As a corporation you're looked at as an employee or board member not an owner... it's a huge difference. Somewhere around 10 to 15 percent...plus it protects your personal assets.
Yep...
All true..
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Old 04-03-2018, 12:51 PM   #40
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Speak to a CPA. I have some initials by my name but i don't want to go through the legal disclosures. this is NOT tax advice. now....

What many are alluding to is the newest structure "du jour" if you will. the Sub S corp. if you are a sole proprietor or individual, everything from your business will be subject to self employment and medicare taxes. this is 12.4% social security and 2.9% medicare tax. if you work for someone, you pay half and they pay half as the employer. BUT, when you are self employed, you pay it ALL!

So, what many do is deem themselves an employee of the S corp. assume the S corp earns $100K in profit. They then pay themselves a salary of $50K which is subject to the employment taxes above. The remaining $50K is distributed from the S corp to the owner (still You!) as a dividend (still subject to income tax, but not employment tax). If there is only one owner and one employee in an S corp and magically that person is the same, you can bet the IRS will focus on this - they know it is a loophole so they scrutinize it as such.

RISKS!
Risks of S-Corporations
The IRS tends to take a closer look at S-corporation returns since the potential for abuse is so large. For example, if you make $500,000 in one year but only designate $20,000 of that as salary income, you might trigger an IRS inquiry, since you are avoiding so much self-employment tax. The guiding principle is that you must designate a "reasonable" amount of your income as wages, rather than a distribution. What constitutes "reasonable" can often be a gray area, but if you push the envelope too far, you put yourself at risk for an IRS audit and potentially penalties and interest on any back taxes assessed by the IRS.

https://turbotax.intuit.com/tax-tips...axes/L4abUcaRn

Good luck and tell us about your business idea!
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Old 04-03-2018, 01:01 PM   #41
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Originally Posted by TeamAmerica View Post
Speak to a CPA. I have some initials by my name but i don't want to go through the legal disclosures. this is NOT tax advice. now....

What many are alluding to is the newest structure "du jour" if you will. the Sub S corp. if you are a sole proprietor or individual, everything from your business will be subject to self employment and medicare taxes. this is 12.4% social security and 2.9% medicare tax. if you work for someone, you pay half and they pay half as the employer. BUT, when you are self employed, you pay it ALL!

So, what many do is deem themselves an employee of the S corp. assume the S corp earns $100K in profit. They then pay themselves a salary of $50K which is subject to the employment taxes above. The remaining $50K is distributed from the S corp to the owner (still You!) as a dividend (still subject to income tax, but not employment tax). If there is only one owner and one employee in an S corp and magically that person is the same, you can bet the IRS will focus on this - they know it is a loophole so they scrutinize it as such.

RISKS!
Risks of S-Corporations
The IRS tends to take a closer look at S-corporation returns since the potential for abuse is so large. For example, if you make $500,000 in one year but only designate $20,000 of that as salary income, you might trigger an IRS inquiry, since you are avoiding so much self-employment tax. The guiding principle is that you must designate a "reasonable" amount of your income as wages, rather than a distribution. What constitutes "reasonable" can often be a gray area, but if you push the envelope too far, you put yourself at risk for an IRS audit and potentially penalties and interest on any back taxes assessed by the IRS.

https://turbotax.intuit.com/tax-tips...axes/L4abUcaRn

Good luck and tell us about your business idea!

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Old 04-03-2018, 02:16 PM   #42
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Quote:
Originally Posted by TeamAmerica View Post
So, what many do is deem themselves an employee of the S corp. assume the S corp earns $100K in profit. They then pay themselves a salary of $50K which is subject to the employment taxes above. The remaining $50K is distributed from the S corp to the owner (still You!) as a dividend (still subject to income tax, but not employment tax). If there is only one owner and one employee in an S corp and magically that person is the same, you can bet the IRS will focus on this - they know it is a loophole so they scrutinize it as such.
This is not correct. All income from an S-Corp is taxed to the shareholders, regardless of your 'designation' as dividend. If you are an employee of the S-Corp, the corp. deducts your salary in determining its net income. But whatever the net income is, you (if the sole shareholder) are taxed with that whether you take it out or leave it in the corp.
If the S-Corp. would otherwise have $100K in profit, you will be taxed on $100K whether you pay yourself some of it as salary or not.

Comments from others making a 'DBA' seem like some type of 'entity' are also erroneous. 'DBA' means 'doing business as'. You file with the county in which you do business so others know that the business being conducted as 'Acme' is actually another entity - an individual, a corporation, a partnership, etc. The 'DBA' is not a taxable entity - it is the name under which an entity conducts business. John Smith could file the name 'Acme' as its 'DBA'; or ABC Corp. could file the name 'Acme' as its 'DBA'.
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Old 04-03-2018, 02:22 PM   #43
Playa
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This is both proof and an example of why our tax codes will never go away. They are so convoluted that intelligent citizens can not decipher thus they are a lever to subject on the people.

Flat tax- every citizen and every Corp pays the same amount
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Old 04-03-2018, 02:29 PM   #44
ddcainjr
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Quote:
Originally Posted by Burnadell View Post
I hope a CPA will jump on here and explain how my thinking is wrong.

I am a CPA and I think you're correct. LLC and S Corps are "pass through" entities which means you pay the same taxes. C Corps are not pass through entities and they pay taxes and then the owners pay additional taxes.

As others have said, you do not need to incorporate. The benefit is reduction of liability. If you are DBA, all of your personal assets are at risk. If you incorporate, only the assets of the entity....Assuming you did not do anything to "pierce the corporate veil", which would cause your personal assets to be at risk.
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Old 04-03-2018, 02:31 PM   #45
txhunter-1
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Here you go, this should give you some info.

https://businessintexas.com/start-business
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Old 04-03-2018, 03:02 PM   #46
FriscoAg
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I went the online route and used incfile.com to start an LLC.
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Old 04-03-2018, 03:13 PM   #47
TeamAmerica
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Originally Posted by 2B4Him View Post
This is not correct. All income from an S-Corp is taxed to the shareholders, regardless of your 'designation' as dividend. If you are an employee of the S-Corp, the corp. deducts your salary in determining its net income. But whatever the net income is, you (if the sole shareholder) are taxed with that whether you take it out or leave it in the corp.
If the S-Corp. would otherwise have $100K in profit, you will be taxed on $100K whether you pay yourself some of it as salary or not.

Comments from others making a 'DBA' seem like some type of 'entity' are also erroneous. 'DBA' means 'doing business as'. You file with the county in which you do business so others know that the business being conducted as 'Acme' is actually another entity - an individual, a corporation, a partnership, etc. The 'DBA' is not a taxable entity - it is the name under which an entity conducts business. John Smith could file the name 'Acme' as its 'DBA'; or ABC Corp. could file the name 'Acme' as its 'DBA'.
We are talking about two different things. Your comment is that the income of the S corp is taxable whether or not cash is distributed to the owner. This is accurate. The difference is how the income is characterized (and therefore taxed). If you have a partnership (or LLC taxed as a partnership), you can not be an employee if you are also an owner of the partnership (i.e. all income is treated as income to the owner).

The S corp will allow you to be both an owner AND an employee. All $100K of profit is taxable (there is no avoiding that and the same applies to partnership or S corps). But the type of income dictates what taxes apply (specifically self employment taxes).

The link to the turbo tax article I included outlines the nuance pretty well in layman's terms.
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Old 04-03-2018, 03:24 PM   #48
friscopaint
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You can go to SOS website and form an LLC in a few minutes, call IRS for EIN and the file a schedule C on your tax return. It's not rocket science.
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Old 04-03-2018, 05:06 PM   #49
Catarina
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Geeze threads like this are a major reason why people are so afraid of starting a business. For all we know, this guy might have a real simple idea that will make a few hundred bucks each month. But reading these responses you would think he's about to set up the next GOOGLE.

Just go set up a DBA, as you grow then change what you need to. Open a business bank account under the new business name. Keep track of your mileage if your going to be driving a lot ( I write off over $30,000 each year just from this). Keep it simple and small and have fun, as you grow you'll naturally start to learn things. Things that might really worry or stress you out now, will soon become normal things that don't worry or stress you out any more.

And before you send a big tax check to the Government, write that check to a nonprofit that's 100% tax deductible. Give away what you can rather than giving it to the **** guberment.

Last edited by Catarina; 04-03-2018 at 05:09 PM.
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Old 04-03-2018, 08:24 PM   #50
Burnadell
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Quote:
Originally Posted by Uncle Saggy View Post
Don't have a clue but I'll have to say you're wrong. Just because I can.



Sent from my iPad using Tapatalk
You and Sparkles quit messin' wif me!

Quote:
Originally Posted by Catarina View Post
Geeze threads like this are a major reason why people are so afraid of starting a business. For all we know, this guy might have a real simple idea that will make a few hundred bucks each month. But reading these responses you would think he's about to set up the next GOOGLE.

Just go set up a DBA, as you grow then change what you need to. Open a business bank account under the new business name. Keep track of your mileage if your going to be driving a lot ( I write off over $30,000 each year just from this). Keep it simple and small and have fun, as you grow you'll naturally start to learn things. Things that might really worry or stress you out now, will soon become normal things that don't worry or stress you out any more.

And before you send a big tax check to the Government, write that check to a nonprofit that's 100% tax deductible. Give away what you can rather than giving it to the **** guberment.


Exactly! Blanket statements like in Post #4 that are not correct (in ALL cases) confuse folks and can be damaging. Every case is different and depends...like my undergarments!
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