His CPA PC: Providing Bookkeeping & Accounting Services to Metro Atlanta
About S Corporations/What Entity is Best for Your Georgia Business
Subchapter S Corporations can have no more than one hundred shareholders and they all need to be U.S. citizens or resident aliens. This corporation type almost always has to have a calendar year as the fiscal year. S Corporation rules have been around since the 1950s and were set up to simplify the rules and regulations of being a business owner.
Liability Protection and Subchapter S Corporations
A subchapter S Corporation, like a C Corporation, affords the business owner personal liability protection from business risks. Some of the keys to maximizing that protection are to treat the corporation like one by doing all your business in the corporate name, signing all of your documents listing your corporate title, not co-mingling any personal issues/bills in the corporation, and by having your annual Board of Directors and Annual Shareholder Minutes Meeting.
Tax Advantages of S Corporations/Incorporating in Georgia
No income taxes are paid with the corporate return. The profits of the business are reported on the personal tax return of the S corporation’s shareholders. As long as you pay yourself a reasonable salary, you may also take shareholder distributions out of the business that are devoid of FICA/Medicaid taxes.
Another advantage of S Corporations is that if you have corporate losses, and you fund (you put the money in the business) those losses personally, then you can deduct those losses on your personal return. Any losses that are funded by the bank (a direct loan from the bank to the corporation) or by trade creditors are not deductible. Below is a sample letter one might send to the IRS to ensure that the S election has been properly received and timely processed by the IRS.
Taxpayer Advocate Office
I am writing to follow up on your IRS Letter dated 1-16-10 (copy enclosed). Please note I have enclosed a copy of the S Corporation election and the signed S Corporation return as requested. Please fix your records accordingly to show that the client was an S Corporation for the tax year in question.
Accordingly please refund any monies previously paid.
I appreciate your attention to this matter and please do not hesitate to contact me should you have any questions.
Very Sincerely Yours, John C. Dillard, CPA, President
www.HisCPA.com Duluth/Suwanee/Johns Creek/Lawrenceville CPA: Income Tax Preparation, Financial Statements & Bookkeeping, IRS Representation, Back Taxes & Offer in Compromise