Quote:
Originally Posted by savedfrommyspokes
My CPA has for years has encouraged me to take this route....my wife has been looking for job opportunities out of state for years also, so I have been reluctant to shell out for the initial cost to set up in my state and then relocate soon after. Each year my CPA lets me know how much I could have saved as an s-corp versus a sole proprietorship and this year it would been about half of what I owed.
To tie this back to the theme of the thread, at some point down the road (hopefully a long time) before I begin to sell off my collection, this is the route I intend to take(if all the current legislation is still in place).
|
Not sure what state you are currently in, or what state it is that your wife is looking to get a new job in either. In any case, the cost for initially setting up a business in most states isn't really much at all, maybe a couple hundred bucks at most, and you can generally do it yourself online through the Secretary of State's office for where you are currently residing. And then if you ever do end up moving to another state, you can probably just contact the Secretary of State's office in your new locale and ask to register the current business so it can now operate in your new home state. No need to start a brand new business or to shut down the old one at all. And that would initially only cost you a couple hundred dollars or so at the most to register in the new state also.
Of course there are other factors to consider also, such as the type of business/work you are going to have/be performing, are there going to be employees, are you going to have inventory or other assets, etc. and so on. You should always consult with a qualified professional before doing anything like that of course.
Now, as for your CPAs specific idea about saving money by becoming an S-Corp instead of operating as a sole proprietor, I assume he's referring to the fact that you have to pay up to 15.3% of your net income as self-employment tax (social security and Medicare) as a sole proprietor. Whereas, if you elect to become an S-Corp, your distributive share of income from the company is not subject to self-employment taxes at all, right? Just be careful, the IRS has talked about his for years and knows that people purposely do this to escape paying in the self-employment taxes. They supposedly are on the lookout for this and always threaten to start cracking down on companies that do this, especially when the owners are actually performing services/work in the business that otherwise should be subject to self-employment taxes.
BobC