Walking you through company incorporation in the Rancho Cucamonga, CA area

The two common goals shared by most entrepreneurs are the taxation of business profits on the individual tax return and the protection of personal assets from claims against the business (limiting liability). In some situations, the best way to do this is through company incorporation into what is called the S-corporation. There is also the option of forming an LLC, or limited liability company.

In the Rancho Cucamonga, CA office of Whyte & Associates, we help our clients identify the ideal time for incorporating as well as the type of incorporation that may best suit their needs.

Understanding the S-Corp

“S-corporation” identifies tax status in which income taxes are paid similarly to partnership or sole proprietorship while you also get the benefit of limited liability. The S-corporation model passes all profits through to owners, who then report income on personal tax returns. This type of incorporation does not require income tax to be paid directly from the corporation. It does require the filing of an informational tax return in the event that there is more than one owner. This tax return will report the portion of income allotted to each shareholder.

Reasons to elect S-Corp status

There are several reasons that S-Corp status may be considered.

• Passing business losses to the personal tax return can offset income that your household may have from other sources.
• Taxable gain upon the sale of the S-Corp may be less than a regular corporation.
• Self-employment taxes, which can account for more than 15 percent of your income, are not “charged” but are applied instead to Medicare and Social Security taxes.

Know your restrictions

• S-Corp status is only available to U.S. residents or citizens.
• The S-Corp must have under 100 shareholders.
• Allocation of profits and losses is in proportion to each shareholder’s interest.
• Corporate losses must be very carefully deducted based on the amount of a shareholder’s investment into the corporation. Adjustments may be made.
• California S-corporations are subject to a 1.5 percent tax on net income.

The good news is that you can elect for S-Corp status at any time. The team at Whyte & Associates, Inc. provides you with the detailed information you need to determine if incorporating is right for you.

We are happy to discuss your business needs in a private consultation. Call (909) 575-0080.