Help With C Corporation - Tilted Forum Project Discussion Community

amonkie · 02-11-2011, 11:53 AM

I would strongly suggest not making financial business decisions of any real magnitude off the advice of a forum. We are not lawyers, and we are not tax experts. Though some members may wish to share their expertise, their anecdotal offerings may not be the solution to your situation, especially considering laws and regulations of Lake County and Illinois may be different.

The_Jazz · 02-11-2011, 11:57 AM

You need to talk to a lawyer.

LordEden · 02-11-2011, 12:03 PM

I'd say, go for it.

That will be $2500, please email me your address for me to send the invoice.

Email me at whythefuckareyouaskingquestionsliket...oooorreals.com

Cynthetiq · 02-11-2011, 12:23 PM

Not only should you talk to a lawyer, but you need to talk to an accountant because there are some serious tax implications to what you are describing for the payout.

Your lawyer and your accountant need to have dinner with both you and your wife.

R0ns0n97 · 02-11-2011, 12:39 PM

Cynthetiq · 02-11-2011, 12:49 PM

I am not a lawyer nor am I an accountant.

Here goes nothing.

The tax implication of letting your wife take the $1M from the company is that you'll be paying double taxes on the money. First the company pays the taxes for that income, then when your wife realizes the income she too will be required to pay income tax on it. This reduces the actual benefit. This is why people like Steve Jobs get other compensation that reduces the total tax implication.

You mentioned she'd maybe getting a dividend instead. If I understand this correctly is she the sole stockholder? If she is, then you could do such a scenario, but again the tax implication is high. If not, then any dividend would have to be distributed to all shareholders as you cannot have two classes of shareholders (different from stock class shareholder ex. Viacom A stock versus B)

Why do you need to disburse the monies to her personally? Can she not continue to get expendable items paid for by the corporation such as telephone, car, travel, etc?

The_Jazz · 02-11-2011, 01:00 PM

While I am always happy to hear flattering things about this place, I am very leery of questions like this. Honestly, if it were my business, these sorts of things would be closely held business secrets that I'd only ask my accountant and attorney since they would be nondisclosure agreements in place. I'm willing to bet that I could probably spend an hour and figure out who your company with you've provided and publicly available information.

I'm just going to caution you that any and all answers you get here are from laymen and that acting on any advice here without professional advice is insanely foolish.

That all said, the tax implications are huge with a lump sum payment like this, both corporately and personally. You may want to investigate options like forgiveable loans. As far as the impact of additional compensation on both of you and the corporation, that's unanswerable given the information you've supplied (and PLEASE - do NOT give us any more).

As far as a Subchapter S Corp, it depends on your current and future revenue streams. Ask the pros.

I usually real estate owned by a Subchapter S corp, but that's me.

R0ns0n97 · 02-11-2011, 01:11 PM

Lindy · 02-12-2011, 09:08 PM

Quote:

Originally Posted by R0ns0n97

I definitely wont be providing any information that I deem should be kept confidential. But again thank you for concern.

Regarding the subchapter S corporation. Some reasons for having this is to pay yourself a standard salary for what you do, which is subject to employment tax, and take the rest of your earnings as dividends, which saves you the MediCare and Social Security taxes you would otherwise be subject to if one were another business entity. The big disadvantage is that you have all the paperwork involved with a corporation, along with a lot of restrictions...

I set up an S-corp to run my personal investment and consulting business. There is hardly any corporate paperwork (probably about an hour a year) and very few restrictions. Of course, I'm the only shareholder, which simplifies things a lot.
Likewise your wife is the sole shareholder. I'm neither an accountant nor a lawyer, but I see no advantage to a C-corp when there is only one shareholder. Corporate profits pass through the S-corp as profit distributions to the shareholder. I'm guessing that you must have a lot of staffing (with 15,000 square feet of office space) so maybe that would preclude S-corp? Ask your accountant or attorney.

Lindy

GreyWolf · 02-13-2011, 05:17 AM

By the time you're dealing in withdrawals of $1 million or more, you're in the category that you need a good lawyer (corporate and tax specialist), and a good accountant. We might be able to offer some generic advice, but they will be able to go over your specific situation with an eye to making sure your tax liability is minimised. They will consider how the withdrawal will affect the total corporate and personal taxes, and the money you pay for their advice will be well spent.

Laws differ from jurisdiction to jurisdiction, so beyond suggesting that withdrawal of contributed capital first might be the cheapest way to get the money (tax-wise), I can't say much more. And even there, I suspect that the banks and suppliers, as well as major customers might have a lot of concerns about increasing your level of leverage that way. Again, that depends on the company, the total contributed capital, your financing methods, restrictions thereon, etc. It might also affect the company's ability to finance operations in the future.

So, like everyone else said... get some good, competent professional help on retainer for decisions of that magnitude. And listen to them. Not any of us who suggest you don't need it.

02-11-2011, 11:46 AM	#1 (permalink)
R0ns0n97 Upright	Help With C Corporation ss Last edited by R0ns0n97; 02-23-2011 at 03:19 PM..

02-11-2011, 11:53 AM	#2 (permalink)
amonkie Drifting Administrator Location: Windy City	I would strongly suggest not making financial business decisions of any real magnitude off the advice of a forum. We are not lawyers, and we are not tax experts. Though some members may wish to share their expertise, their anecdotal offerings may not be the solution to your situation, especially considering laws and regulations of Lake County and Illinois may be different. __________________ Calling from deep in the heart, from where the eyes can't see and the ears can't hear, from where the mountain trails end and only love can go... ~~~ Three Rivers Hare Krishna

02-11-2011, 11:57 AM	#3 (permalink)
The_Jazz Asshole Administrator Location: Chicago	You need to talk to a lawyer. __________________ "They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin "There ought to be limits to freedom." - George W. Bush "We have met the enemy and he is us." - Pogo

02-11-2011, 12:23 PM	#5 (permalink)
Cynthetiq Tilted Cat Head Administrator Location: Manhattan, NY	Not only should you talk to a lawyer, but you need to talk to an accountant because there are some serious tax implications to what you are describing for the payout. Your lawyer and your accountant need to have dinner with both you and your wife. __________________ I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not. What's the best nation in the world? DO-NATION!

02-11-2011, 12:39 PM	#6 (permalink)
R0ns0n97 Upright	ss Last edited by R0ns0n97; 02-23-2011 at 03:25 PM..

02-11-2011, 12:49 PM	#7 (permalink)
Cynthetiq Tilted Cat Head Administrator Location: Manhattan, NY	I am not a lawyer nor am I an accountant. Here goes nothing. The tax implication of letting your wife take the $1M from the company is that you'll be paying double taxes on the money. First the company pays the taxes for that income, then when your wife realizes the income she too will be required to pay income tax on it. This reduces the actual benefit. This is why people like Steve Jobs get other compensation that reduces the total tax implication. You mentioned she'd maybe getting a dividend instead. If I understand this correctly is she the sole stockholder? If she is, then you could do such a scenario, but again the tax implication is high. If not, then any dividend would have to be distributed to all shareholders as you cannot have two classes of shareholders (different from stock class shareholder ex. Viacom A stock versus B) Why do you need to disburse the monies to her personally? Can she not continue to get expendable items paid for by the corporation such as telephone, car, travel, etc? __________________ I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not. What's the best nation in the world? DO-NATION!

02-11-2011, 01:00 PM	#8 (permalink)
The_Jazz Asshole Administrator Location: Chicago	While I am always happy to hear flattering things about this place, I am very leery of questions like this. Honestly, if it were my business, these sorts of things would be closely held business secrets that I'd only ask my accountant and attorney since they would be nondisclosure agreements in place. I'm willing to bet that I could probably spend an hour and figure out who your company with you've provided and publicly available information. I'm just going to caution you that any and all answers you get here are from laymen and that acting on any advice here without professional advice is insanely foolish. That all said, the tax implications are huge with a lump sum payment like this, both corporately and personally. You may want to investigate options like forgiveable loans. As far as the impact of additional compensation on both of you and the corporation, that's unanswerable given the information you've supplied (and PLEASE - do NOT give us any more). As far as a Subchapter S Corp, it depends on your current and future revenue streams. Ask the pros. I usually real estate owned by a Subchapter S corp, but that's me. __________________ "They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin "There ought to be limits to freedom." - George W. Bush "We have met the enemy and he is us." - Pogo

02-11-2011, 01:11 PM	#9 (permalink)
R0ns0n97 Upright	Thank you for your concern ss Last edited by R0ns0n97; 02-23-2011 at 03:19 PM..

02-13-2011, 05:17 AM	#11 (permalink)
GreyWolf Sober Location: Eastern Canada	By the time you're dealing in withdrawals of $1 million or more, you're in the category that you need a good lawyer (corporate and tax specialist), and a good accountant. We might be able to offer some generic advice, but they will be able to go over your specific situation with an eye to making sure your tax liability is minimised. They will consider how the withdrawal will affect the total corporate and personal taxes, and the money you pay for their advice will be well spent. Laws differ from jurisdiction to jurisdiction, so beyond suggesting that withdrawal of contributed capital first might be the cheapest way to get the money (tax-wise), I can't say much more. And even there, I suspect that the banks and suppliers, as well as major customers might have a lot of concerns about increasing your level of leverage that way. Again, that depends on the company, the total contributed capital, your financing methods, restrictions thereon, etc. It might also affect the company's ability to finance operations in the future. So, like everyone else said... get some good, competent professional help on retainer for decisions of that magnitude. And listen to them. Not any of us who suggest you don't need it. __________________ *The secret to great marksmanship is deciding what the target was AFTER you've shot.*