How to Form Your Own "S" Corporation and Avoid Double-Taxation

by Nicholas, Ted; Friedman, Robert

• ISBN13: 9781574101263
• ISBN10: 1574101269
• Edition: 2nd
• Format: Paperback
• Copyright: 1999-09-01
• Publisher: Dearborn Trade Pub

Summary

Starting and growing a business is hard enough without incurring the double taxation of a "C" corporation. Those forming an "S" corporation are taxed only once -- at the personal income tax rate. This completely updated reference offers step-by-step instructions and forms to save money and protect personal assets by forming an "S" corporation.It explains in detail how to apply for "S" corporation status for either a new or existing small business. It includes all the forms needed along with easy-to-use instructions and sample year-end tax documents for an "S" corporation."S" corporation benefits include these lucrative, money-saving opportunities: -- avoid corporate tax-- find a personal tax shelter-- own "S" corporation investments-- sell property tax-free to an "S" corporationAll new and updated information includes: details on the recent Small Business Job Protection Act, state requirements for "S" corporation eligibility, as well as detailed pros and cons of "S" corporations versus limited liability companies (LLCs).

Author Biography

Ted Nicholas has written more than 14 books on business and finance since his writing career began in 1972 with the publication of the million-plus classic, How to Form Your Own Corporation Without a Lawyer for Under $75. He currently owns and operates several publishing, marketing, and consulting companies; serves as marketing consultant for businesses of all sizes; and conducts business seminars around the world. Robert Friedman has helped many small business clients in his practice as an attorney with Friedman and Ranzenhofer, P.C.

Table of Contents

How the ``S'' Corporation Works for You	1	(7)
The Concept of Double Taxation	3	(1)
How the ``S'' Corporation Works for You	3	(3)
The Numbers That Work for You	6	(1)
Choosing Your Business Organization	7	(6)
The Six Choices	7	(5)
State Tax Consequences	12	(1)
If You Have an Existing Corporation	12	(1)
The First Step: Creating Your Corporation	13	(18)
The Need to Incorporate	13	(1)
Benefits of Delaware Incorporation	14	(1)
Forming the Corporation without Engaging a Registered Agent	15	(2)
A Close Corporation	17	(1)
Registered Agents	18	(8)
Changing Registered Agents	26	(5)
Qualifying Your Business	31	(18)
The Basic Requirements	31	(7)
Additional Requirements for Existing Corporations	38	(2)
Protecting against Loss of Eligibility	40	(9)
Timing and Mechanics of Filing	49	(20)
Securing Your Employer ID Number	49	(1)
The Documents That Must Be Filed	50	(2)
Timing Your Filing	52	(2)
Filing and Eligibility	54	(1)
Shareholdere Consent	54	(15)
Four Situations in Which ``S'' Corporations May Be Taxed	69	(4)
Capital Gains	70	(1)
Excess Passive Investment Gains	71	(1)
Liquidations	72	(1)
Maximizing Your Benefits on Corporate Losses	73	(6)
Determining Basis in Debt	74	(1)
How Basis Changes	75	(1)
Carrying Losses Forward	76	(1)
Making the Most of a Losing Situation	77	(2)
Compensation and the ``S'' Corporation	79	(10)
Compensation	79	(3)
Why It Pays to Minimize Compensation	82	(2)
Dovetailing Compensation and Tax Years	84	(2)
Dangers in Income Splitting	86	(2)
The Danger Involved in Interest-Free Loans	88	(1)
Fringe Benefits and Retirement Plans	89	(6)
Fringe Benefits	89	(3)
Retirement Plans	92	(3)
Transferring Shares Back to the Corporation	95	(12)
When Is a Transfer a Sale or an Exchange?	96	(1)
Consequences of Sale or Exchange versus Distribution	97	(2)
Closing the Books if All Shares Are Sold	99	(2)
Sales to a Third Person	101	(1)
Election to Close Corporate Books When a Shareholder Sells All Shares	101	(6)
Revoking or Terminating the ``S'' Corporation Election	107	(10)
Revocation	107	(3)
Termination	110	(2)
Impact of Revocation or Termination	112	(1)
Revocation of ``S'' Corporation Election	112	(5)
Preparing Your ``S'' Corporation's Annual Tax Return	117	(22)
Form 1120S: U.S. Income Tax Return for an ``S'' Corporation	118	(5)
Form 1120S: Schedule A---Cost of Goods Sold	123	(2)
Form 1120S: Schedule B---Other Information	125	(1)
Schedule K: Shareholders' Share of Income, Credits, Deductions, etc.	125	(4)
Schedule K-1: Shareholder's Share of Income, credits, Deductions, Etc.	129	(10)
Appendix A Income Tax Forms for an ``S'' Corporation	139	(36)
Appendix B IRS Schedules D and E---Capital Gains and Losses and Supplemental Income and Loss	175	(8)
Appendix C IRS Form 4562---Depreciation and Amortization	183	(16)
Appendix D IRS Form 4797---Sales of Business Property	199	(8)
Appendix E IRS Form 8825---Rental Real Estate Income and Expenses of a Partnership or an ``S'' Corporation	207	(4)
Index	211