Thank you Fred, this is a very helpful perspective.

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"Rod" wrote:

- quote -

Paying employees is not reinvestment; it's a business
expense. For best advice on how businesses and accounting
work for your situation, you should see a professional.

Your original question was disparate businesses in one corp.
It is legal as long as your articles of incorporation
permit that. A CPA can set up a practice, and also sell
live bait and hire somebody to do psychic readings. IRS
cares not, nor is there special tax benefit to this. But
you don't want to expose the assets of one business segment
to lawsuits against another. Incorporating is a way of
minimizing the financial exposure of operating as a
proprietorship, and separate corps are then advisable for
disparate businesses. Or just run the live bait operation
-- little liability exposure -- as a Sch C.

In general, tax law does not provide sole proprietors
special benefits by incorporating. What you and spouse can
do in a corporation(s), you can do as Sch Cs on a joint
1040. The only significant one can be the employee benefits
area, like a 401(k) plan. Else you'll have a lot more tax
and nontax forms to file, perhaps a hefty corp franchise
fee, convening annual board meetings, more complex records
to maintain, and paying a professional for all this.

E.g. also, if you have a home office, with a corp you may
lose the deduction. As employees of the corp, avoiding the
"2% of AGI itemized deduction clip" for employee biz
expenses is at least complicated if not futile.

Fred F.

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Hi guys, thanks for all of the help. I should clarify a
couple things based on the input.

1. This would not start until next year.
2. The re-investment would come in the form of paying
employees.

Does these things make it more kosher?

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"Rod" wrote:

- quote -

No. The flaw in your reasoning is that money reinvested in
the corporation is necessarily some kind of tax deduction,
eliminating profit. Yes, you can use all the profits to buy
certain business assets and claim a one-year depreciation
write-off as a "section 179" deduction, but you can do that
as a Schedule C or a corporation. If section 179 deduction
= profit before asset purchase, then no taxable income either
way. No magic there, nor opportunity for loophole.

Fred F.

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In article <11ov9409v8752b4[at]corp.supernews.com> ,
Rod <rodjonwe[at]lycos.com> wrote:

- quote -

Re-investing profit in a business (e.g. buying inventory)
does not render the profit non-taxable.

Seth

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- quote -

You really need a tax advisor because what you are suggesting
will not fly. Re-invested earnings are earned income subject
to taxation after deductions. For 2005, you have less than a
month to do any planning and then to implement it.

Dick

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My wife and I would like to find a way to re-invest our
earnings with the goal of no taxes on those earnings.

We are considering the following approach:
1. Form a corporation
2. We would each be employees
3. We would each earn money with different services
offered, let's call them A and B
4. Service B will eat up as much investment as we give it.
So, we would apply all earnings from A nad B toward
building out service B.
5. At the end of each year, there would be no tax because
we had re-invested all of the money.

I get the feeling that if we did this as sole proprietors
the IRS would classify our efforts as different businesses
and we would have to file different Schedule C's. Thus the
desire to use a corporation.

Is this workable? Does the IRS mandate that the services
offered by a corporation need to be similar in nature?
Would an LLC also allow us to achieve this goal? Any other
issues we should consider?

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