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Thread: Everyone told me to form an S-Corp...

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    God/dess Deogol's Avatar
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    Default Everyone told me to form an S-Corp...

    but I am plenty glad I formed a C corp now:



    Small business owners seeing personal taxes going up.

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    Banned Melonie's Avatar
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    Default Re: Everyone told me to form an S-Corp...

    ^^^ the obvious issue is that unincorporated sole proprietor businesses ( i.e. most exotic dancers), 'and pass-through corporations ( Subchapter S, LLC's, LLP's etc. ) essentially must report business income as additional personal income. Given that the Obama plan / expiration of the Bush tax cuts will significantly increase personal income tax rates, it also increases de-facto business tax rates for these business structures.

    This subject was raised in a different thread in regard to a 'serious professional dancer' wondering about the best way to 'retain' as much of her pre-tax earnings as possible ... and I responded that so much is in flux re tax increases that it's not possible to answer that question right now.

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    Senior Member Sad Sally's Avatar
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    Default Re: Everyone told me to form an S-Corp...

    Can't a person who starts a business as a sole-proprietor later change it to a corporation? Once you start making the big money you should change over anyway to eliminate liability.

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    Banned Melonie's Avatar
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    Default Re: Everyone told me to form an S-Corp...

    ^^^ yes ... but this approach can potentially turn into an accounting and liability nightmare. The problem is that, legally speaking, there will be two separate businesses that are effectively owned / controlled by the same person(s). As such, the sole proprietor business can still be the target of litigation even if it has effectively ceased current operations. There are also similar issues with depreciation of business property, with business loans etc. over time if they were originally booked under the sole proprietor business. Such issues are no big deal when, say, a sole proprietor business is sold outright to an independent public corporation , as opposed to the transfer of business assets and liabilities from a sole proprietor business to a closely held private corporation under the same de-facto ownership.

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