We believe the term "S" corporation to
be the most widely misused of all IRS elections So lets begin with the
basics. The business model for the purpose of this discussion will be a
privately held corporation that generates less than $10 million dollars in
annual sales We will also discuss the type of entity we should use for
operating our business, what an
is, and when a standard Private Corporation should be converted to an
"S" Corporation. More specifically, how that business will benefit by
Nevada and Wyoming.
Understand what is S means you take your C corporation which
is what all privately held corporations initially are and you tell IRS you
want it taxed on your personal social security number. Then the most
commonly misunderstood term is "double taxation". Double Taxation exists
when in the operator of their private corporation forgets to pay himself
Possible? Conceivable? Personally, I have never met this a
business owner that forgot to pay himself? I have certainly met a lot of
accountants who think their clients are that "stupid" That is why I
have said for many years that "S" stands for stupid. Did I mention
that the audit rate for S corporations and the similarly structured "sole
proprietorships" are exponentially higher than all other IRS elections?
"S" Corporations have two primary uses, pass through income
and for the mom and pop corner store.
If you elect to file as an "S" Corporation there is no
reason to file in Nevada When you file the 2553, the IRS will share that
information with your state (and every sub government division) and visa
versa, therefore all the benefits of Nevada have been lost. Understand
that when you decide to be an "S" Corporation you are saying that the
business is you!
Personally my experience has been that all operating
businesses should be C Corporations except when pass through income or
partnerships are required. "When should I file in Nevada"? is actually a
more complicated question. Most businesses will not pass the test of the
local states revenue officers requirements.
Example's brick and mortar retail stores must file in the
state they operate. Marketing, consulting, fulfillment, credit, any online
or internet based, etc. maybe Wyoming or Nevada based companies.
We hope this help a little please feel free to call, we are