- quote -

I wouldn't file. Sounds like there is no income to report
and that this is more like a hobby in reality than a
business.

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"Larry Bohen" <lbohen[at]audiobooksonline.com> wrote:

- quote -

Do you need to file a sole proprieter form if you sell say
$500 worth on ebay, all on stuff that you bought new at much
more such as books. A garage sale on the web so to speak.

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"Larry Bohen" <lbohen[at]audiobooksonline.com> wrote:

- quote -

An S corp is similar to a partnership except debts of the S
corp to anyone other than the shareholder do not create
basis in the stock. This comes into play during loss years
because you can never use the losses in excess of your
basis....it has to be carried forward as a suspended loss.

A C corp is treated as a separate entity and is taxed on its
income. The first 50k of profit is taxed at 15%, the next
25k is at 25% and from 75-100k is taxed at 34%. From
100k-335k it's taxed at 39%, then the rate above that goes
back to 34%. If your business is capital intensive (you
carry a lot of receivables, buy and maintain office
buildings, etc) a buildup at 75-100k per year is not such a
bad rate. However, when you reach a point where you build up
more funds (working capital) than needed to operate, you
will have to distribute the profit less tax to yourself, the
shareholder, and get taxed at new lower capital gain rates
(used to be ordinary). If you don't distribute such excess
capital, you will be subject to undistributed profits in
excess of the amount needed to operate the business.

If either the S or C corps exceed $5mil per annum of gross
sales, they can't use cash basis.

Mike Lewis, CPA

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My wife and I own/operate a Web based retail business based
in Vermont. We are currently a "sole proprietorship." I am
considering transferring the business to an S or C corporation.

What are the pros and cons of S vs. C incorporation?

Is there a deadline to file (S or C) for being considered a
corporation for the 2003 calendar tax year?

--
Larry Bohen
www.audiobooksonline.com

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