Posted by Ali/IL on 8/15/07 9:50am
Msg #205668

A tax question

I would like to start treating myself as a company.

I saw that someone gave herself a company name. Then treated herself as an employee. Withdrew for taxes,social security and medicare tax.

How can I go about doing this?

Reply by Jersey_Boy on 8/15/07 9:52am
Msg #205669

get an accountant. n/m

Reply by Ali/IL on 8/15/07 9:54am
Msg #205671

Re: get an accountant.

I would like to do it myself to start with.
Thanks for your answer.

Reply by Jersey_Boy on 8/15/07 9:56am
Msg #205672

Re: get an accountant.

If you don't know what you're doing. It's probably best to have an accountant help you get that rolling. You don't want to find out you were doing it wrong for a year and then have to fix it.

JMO.

Reply by SharonMN on 8/15/07 1:54pm
Msg #205767

Re: get an accountant.

It is fairly simple to set up a corporation or LLC - the Secretary of State can provide the forms.

HOWEVER, you need to understand all of the benefits and drawbacks for each of the various types of business entities in order to make an intelligent choice. Depending on the entity you choose, you may need to pay annual fees, additional taxes, appoint a board of directors, etc. Make sure the benefits outweigh the additional expenses and responsibilities. If you haven't already done a full analysis (not just based on what you heard some other person did), a small business lawyer and/or accountant can help you with this.

Reply by Philip Johnson on 8/15/07 10:16am
Msg #205682

I agreee with JB

Spend a couple of hundred dollars and get the right advice from the beginning and save yourself a world of trouble down the road. As they say in the legal world "only a fool has themselves as a client."

Reply by John_NorCal on 8/15/07 10:18am
Msg #205683

Very simple. That person set themself up as a corporation. As JB said, get some advice from a tax accountant.

Reply by Les_CO on 8/15/07 10:39am
Msg #205700

Yup! You need an accountant! But that said, why in the world would you want to do this? If you incorporate, (even a sub-S) and employ yourself as you said. You must file withholding, quarterly reports, (annual report to the State) and could end up taxing yourself twice (if your Corp. makes a profit.) And you will definitely NEED an accountant to do your Federal and State tax returns. You sure don’t need this headache for a simple notary business. Try a simple sole proprietorship. Or if you’re worried about liability go for a LLC. Just think of a name, file a trade name affidavit, get a federal tax ID number, and you’re set. Just remember to keep a set of books (for the accountant you will still need to hire)

Reply by Shannon_Va on 8/15/07 10:49am
Msg #205704

No Legal or accountand advise here, just my opinion and what was told to me...

Get a tax id number, www.irg.gov, I never use my social security number...eek...
I was told to setup as an llc, sole proprietor. I dont take taxes out of my pay when I write myself a check. I take it as a draw or dividend, what ever you want to call it, same thing....I may have to pay a small amount for self-employment tax, but it is much better than being taxes twice.
If you withhold payroll taxes, you not only have to match your federal and social secutiry witholdings, the company gets taxed and then when you file, you get a k-1, like a 1099 sort of, then on your personal return, you have to claim the income from the k-1 and pay taxes as income. So the company and you get taxed.
I rather take the income directly

Look thru the irs web site, there is alot of good information there under the small business section....

But seriously, call an accountant who deals with businesses, not just some tax office open during tax season

Reply by Rachel/ORWA on 8/15/07 11:21am
Msg #205719

One reason to be an S-corp, instead of a sole

proprietor, is to pay yourself a minimal salary, which you pay soc. sec. tax on, and take the rest of your income as "draws," which you don't pay soc. sec. tax on.

Per tax laws, the salary has to be "reasonable," which is left undefined. If you can justify it in the event of an audit...

My husband & I operate our other business as an S-corp; I operate my notary business as a sole proprietor. You have to do the math on the tax implications to determine which is best for you. JMHO, of course, not tax or legal advice, for any lurking attorneys reading this board...

Reply by Les_CO on 8/15/07 1:09pm
Msg #205739

Re: One reason to be an S-corp, instead of a sole

I agree....But what happens when you do or do not, pay those "draws" back? Who gets the profits/losses at year end? And is it taxable income? Sounds like accountants needed all around. Seems to me that the original poster was asking how to do all this WITHOUT the advise of an accountant, and the majority opinion is that course of action would be foolish.

Reply by Rachel/ORWA on 8/16/07 1:28am
Msg #205877

Re: One reason to be an S-corp, instead of a sole

What happens is that you pay taxes on the draws according to the tax bracket you're in. It's normal income, just not subject to social security taxes (and also, of course, not accruing towards any social security benefits, assuming there are any, down the road). Of course, if you come into a windfall and want to reduce your taxable income for the year, you can "pay back" money to your business (i.e., reduce your total draw amount).