Is c corporation best structure to seperate taxes?

Question

Is a c corporation the best business structure to keep business income and taxes seperate from your personal filing???

Account Closed · Answer

Troy,

What is not clear is if you have a good reason to keep the business income off your personal tax return.  You may have some personal reasons that might make sense.

I would agree with Ryan, that you should meet with an attorney or CPA to discuss your circumstances and so that you have competent advice before starting the business.

An LLC is very versatile allowing it to be treated as a corporation, partnership or sole prop for income tax purposes.

Ryan Webber · Answer

No, Troy, you are NOT clear.

ANY entity will accomplish that, just as Charles shared.  All entities will require separate tax returns with the IRS unless its a sole proprietorship Limited Liability Company (LLC) and you elect to not file a separate return with the IRS.

A pass through entity does NOT mean that you have only one tax return.  A pass through entity (with the exception of the above referenced LLC) must have its own tax return.  I think you are confused on the wording here, and you are making a decision to have a C corp for the wrong reasons.

Even if you want the C corp for tax purposes (which that does not seem to be the case with you), an LLC is the easiest to setup and maintain, and, if you are a sole proprietorship, you can elect to be considered a C corp with the IRS.  You get the ease of an LLC and the tax write offs of the C corp (if that's what you are looking for).

Either way, you have to have separate accounts, records, etc with ALL entities, no matter what.  If you don't keep the records separate then you face the likely possibility of losing your corporate veil protection if you ever get sued, just as Bryan shared.  That means your personal assets are liable for your business' mistakes.

You really need to talk to a qualified accountant in your state about how to structure your business.  Different entities in different states also have different tax liabilities on a state level.

So, Troy, let me make this real clear for you - MAKING  THESE  DECISIONS  WITHOUT  DIRECTION  FROM  A  QUALIFIED  ACCOUNTANT  IN  YOUR  STATE  IS  A  MISTAKE.

Account Closed · Answer

Your question is a little confusing because it is necessary to read between the lines.

A C-corp is the only entity that is not a pass through and business income is reported on a separate tax return that does flow to your personal tax return.

An S-corp, partnership or LLC are all pass through entities that use a separate tax return, but the income(loss) passes through to your personal tax return.

A sole prop is reported on a schedule C and which is a separate schedule on your personal tax return.

Account Closed · Answer

Troy,

A C-corporation is usually more desirable when you have many employees and want to provide benefit programs that generally are not available for other types of entities.

Regardless of business structure you will want to separate your business activity form any personal activity.  Many investors start out strictly as investors rather than creating a business entity and even in this situation you want to keep good records of your investment activities.

I'm not sure if I'm understanding your question exactly.  Are you asking how to file separate tax returns for business and personal?  If that is the question, then yes the C-corp entity will accomplish this.  Not sure what your circumstances are but maybe this is the best choice for you.

If you are asking how to keep business and personal separate, then I usually suggest starting with separate bank accounts, credit cards, etc.  This makes it easier when or if you ever get audited.

In this situation any business entity will accomplish this for you.

Bryan Hancock · Answer

Most investors like avoiding a separate set of taxes for the C-corp too.  If you run your business income through a C-corp it is going to get taxed at the corporate level and AGAIN when you take the money out via dividend, distribution, etc.  That is my understanding at least.

I am certainly not a tax expert, but it seems like your strategy above is pretty expensive from a taxation standpoint.

With a s-corp you can also take a salary/dividend split on anything subject to FICA taxes, which will save you a bundle too.

I think you need to speak with a CPA about your plans and goals.  They should be able to help you get set up right.  Try asking people at your local REIA for some referrals.  KKO out of Utah is excellent at entity structuring if you don't mind using someone out of state.

Will you be doing flips or buying long-term rentals?

Bill Gulley · Answer

Troy, if you are considering buying skyscrapers with Donald Trump, consider a C corp. If you are buying single family homes to rent of flip as an small investor, talk to your attorney about an LLC.  Accounting is not a problem, just keep your personal life out of your LLC. Keep you LLC accounting and records. As Charles pointed out, you earn the income in the LLC then that profit is reported on you personal return.

It's begging to sound like you want to keep your income in a company and not claim it personally, you have to pay taxes on your income. Do you have other concerns, like child support or alimony? Good luck....

Vikram C. · Answer

Troy, I think Charles has answered your question well.  You are right that a C Corp is a very good entity for the purpose of having a business that has separate accounts and corporate results do not pass through to your personal account.  As some of the others have pointed out, there are disadvantages to a C Corp with respect to the double-taxation of dividends.

I somewhat disagree with some of the posters who have suggested that a C Corp is not a wise choice.  I have had C Corps in the past and most large businesses are C Corps.  It has many advantages over other entities as your business grows, including the ability to sell ownership interests more easily, take the company public at a later point in time, have non-U.S. shareholders, etc.  It is the preferred form of business ownership for large businesses.

But the other posters are correct in stating that most smaller businesses may benefit from other forms of ownership (LLC, LLLP, etc.) or electing to be treated under subchapter S.

Troy Michaels · Answer

ok, we are clear. a c corp is what i need to do.

Troy Michaels · Answer

yes, i wanna file SEPERATE business and personal tax returns, which is the reason i was looking at c corporation.

Justin S. · Answer

Most RE investors use:

1.  LLC

2.  LLC taxed as and S-corp

3.  S-corp

I've never heard of an investor using a C-corp, not to say its wrong, its just not used that often.

Here is a link for a good resource on explaining the difference between the different entities.  Protecting the corporate veil is not entity specific, its more of the business owner and how they chose to do their records.

http://www.keytlaw.com/az/entities/azentities.htm

Is c corporation best structure to seperate taxes?

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