Business Formation - Posted by Darren

Posted by raelynn mitchell on December 15, 1998 at 15:58:52:

on your personal situation. He is right, S Corps are reported to the IRS on your 1040. C Corps use Form 1120. But there are advantages to using a C Corp as well. S Corps “flow through” to your personal return and/or income. C Corps are separate, do not flow through. But C Corps are taxed at 15% for the first $50,000 or so, and C Corps can deduct as ordinary expenses things that S Corps must show on a personal return–and therefore are sometimes limited.

Another way of looking at this is, you (the individual) are taxed on INCOME. But a corporation is not. It is taxed on PROFIT. And that is AFTER expenses are deducted. For instance, there are limits on the health costs that you can deduct. A corporation doesn’t have those limits most of the time, but if it flows through to you it might be limited by YOUR ability to deduct these items.

C Corporations filed in Nevada can also be a benefit to someone who may have a tax problem and is preparing for facing the IRS with an Offer in Compromise, however this is a highly specialized area and you MUST seek the best specialist you can find if you have this problem. In Nevada, the shareholders are NOT required to be revealed to anyone, thus the ultimate in anonymity.

Another neat thing about corporations: 1099s are not required if there are services provided from one company to another. An independent contractor person not incorporated gets a 1099. You could theoretically work for a corporation exclusively, at say $10/hr., and someone wishing to hire you may be willing to pay $25 or more (the going rate for your services, depending on what those services are). They are required to hire the corporation in order to get you, you the individual gets the $10/hr, has deductions on the $10/hr., and the payroll tax is calculated based on $10/hr. The other $15/hr? Maybe it’s spent on expenses required in the running of the business, maybe not. But the payroll taxes are less.

Whatever you do eventually decide, be sure to visit and check out the list of things to do to be sure to get sued. It’s a definite “what NOT to do” list.

Business Formation - Posted by Darren

Posted by Darren on December 13, 1998 at 22:58:41:

I am a greenhorn when it comes to real estate investing but I am chomping at the bit to get started. The question I have is what type of formation do I use? LLC, C or S Corp. I don’t have a particular strategy in mind (lease options, wholesale, flips,) but would like to limit my liability from the very first deal I do. Any sugestions would be greatly appreciated!!

Re: Business Formation - Posted by WadeFL

Posted by WadeFL on December 14, 1998 at 22:37:06:

I am not an attorney but I have been operating my own S corp for three years.

S Corps are great because once you start making a lot of money you are not subjected to double taxation…dividends and income.

It shows up on your 1040, and the tax bracket is usually more lower. You enjoy the liability protection of a big corporation and if you are the sole owner, your profits can basically go to you. PRETTY NICE. Get that strategy going and make it happen.

I would strongly suggest using an attorney to set up your corporation. A GOOD one will help you shelter your income from unnecessary fees, etc. Look into forming a trust for privacy and look into offshore bank accounts for ultimate privacy. In some offshore havens, you can gain a higher level of security and privacy and in some cases get as much as 50% interest on your money. I know a few right now that pay that much!!!

Good luck…dont lose your shirt…seek a good attorney…I DID!!

Warmest Regards,


P.S. Check out Bronchick. He has a course on Bulletproofing your Corporation. HE IS AN ATTORNEY!!

Re: Business Formation - Posted by Rob FL

Posted by Rob FL on December 14, 1998 at 18:38:49:

Check of some of Bill Bronchick’s How to Articles. He goes into this in detail.