In California, a corporation sole may be formed by "the
bishop, chief priest, presiding elder, or other presiding
officer of any religious denomination, society, or church,
for the purpose of administering and managing the affairs,
property, and temporalities thereof." (California
Corporations Code Section 10002)

That's all. There are no other professions involved so I
have no idea how any other profession may be brought into
it. I have already done negotiations with IRS CI with two
different clients who formed (or so they thought)
"corporations sole." Both attempted all kinds of
self-dealing, such as donating their income to their
"ministry," then deducting the donation on their 1040.
Prosecution was declined, but the civil fraud penalties were
ugly.

Corporations sole in California a governed by Corporations
Code section 10000 et. seq. As a result, there is no common
law concerning the scope or definition of such an entity in
California.

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raylopez99 wrote:

- quote -

That's not actually what Drew said. The employee of a
corporation must have wage income, subject to FICA taxes,
before either the employee or the employer can fund a
retirement plan. The plan contributions themselves aren't
necessarily subject to FICA taxes (employee contributions
are, employer contributions aren't).

If I thought your goal was to maximize your retirement pot,
rather than to avoid/evade FICA taxes, I'd suggest looking
into a Solo 401(k).

Phoebe

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"raylopez99" <raylopez99[at]yahoo.com> wrote:
- quote -

Two other advantages leap immediately to mind. The law
requires an S corporation to pay its owner a reasonable
salary. Zero is not a reasonable salary - see for example
the Radtke and Spicer cases.

The other is that paying into Social Security increases your
Social Security benefits. Before you say "but I am not
going to collect it" or "I am going to save what it would
have been", please don't. I have seen how this almost
always works out, besides see advantage one. And even when
bankrupt Social Security is estimated to pay 70% of promised
benefits, so while you may not get what you are "due" you
will get something.

---
Drew Edmundson, CPA
Cary, NC

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Drew Edmundson wrote:

- quote -

Thanks Drew Edmundson. I will keep in mind that
SS/Medicare, FUTA, etc have to be paid on compensation
before said compensation monies are used to fund retirement
by a corporation (I have done payroll myself but it's been a
few years). So I suppose the only real advantage of a
retirement fund, aside from its use as a recruitment tool
(i.e. a fringe benefit for recruitment purposes) is that the
retirement fund monies grow 'tax free', and for a 401(k) the
employee can put in and/or get a higher maximum contribution
per year than he/she can with a traditional IRA. I was
under the impression there was some payroll tax benefits as
well, but I was wrong***.

Thanks,

RL

*** As I re-read this, I also have figured out a small
additional benefit of a retirement contribution: in theory
it might put you in a smaller tax bracket if the employee is
on the borderline between tax brackets--since retirement
monies are backed out for income tax purposes.

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- quote -

One more try. the 25% is based on the actual salary you are
paid, and not on profits. you don't just divide up the
profits 75/25. If you've had 100,000$ profit before your
salary, and on Dec 31st pay yourself a salary of 60,000$,
then maximum contribution, subject of course to provisions
of the plan, will be a max of 15,000$.

And that's where you need help from a competent local tax
pro.

That's all.

ChEAr$,
Harlan Lunsford, EA n LA

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- quote -

Perhaps you would have received a better answer before now
if you hadn't used the dirty words "corporate sole." To
answer your question, retirement contributions are based
upon compensation. Compensation is, by definition, typically
subject to Social Security and Medicare taxes (with the SS
tax being limited to the first $X of wages - X is indexed so
it changes every year).

So what you propose, no payroll but a retirement
contribution is illegal and that is why you don't see a lot
about it on the Internet.

As a very general reference, please note the title to
Subchapter D is "Deferred Compensation, etc." It covers
Sections 401 to 436 which discuss the rules for retirement
plans.

---
Drew Edmundson, CPA
Cary, NC

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- quote -

No, the plan is to pay the employee (one, myself, the sole
owner of an S-corp) 'retirement' monies (401k, SEP-IRA,etc)
and not pay payroll (and thus not pay payroll taxes). But
since I can't find any clear information on the internet,
probably because it's so rare, not that it's illegal, I'll
probably go for the traditional formula of 25% retirement
money/ 75% wages paid.

RL

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raylopez99 wrote:

- quote -

And copy this newsgroup, too. IMWTK.

- quote -

I dunno either. never heard of such. It's not even in my
original tax research book, a 1956 Prentice Hall Tax Guide.

- quote -

Again, please get competent local tax help.

ChEAr$,
Harlan Lunsford, EA n LA

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- quote -

Thanks. If, given I am a professional corporation that has
one owner, you can figure out a way I can contribute 100%
(or a sizeable portion) of my "profits" (money after
expenses) to my retirement fund (401k and/or SEP-IRA),
without having to pay FICA, FUTA, ss/medicare taxes
("payroll taxes"), please let me know. I only know of
declaring a dividend to avoid these "payroll" taxes, and the
dividend has to be kind of small as I recall from memory
(less than $10k comes to mind, though I don't know where I
picked that up from). Otherwise, if you declare 100% (or a
sizeable portion) of your "profits" without paying payroll
taxes, I think you get audited by the IRS, or at least
increase your red flags.

Obviously I don't do accounting or tax stuff for a
living--if you do, hats off to ya.

Cheers,

RL

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"fred jorden" <knowtax[at]verizon.net> wrote:

- quote -

No, technically you have no ownership interest. There in
fact is no "owner." The closest thing to an owner there is,
is the state, which provides for creation of such an entity.

Stu

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If I form a corporate sole can I sell it to El Diablo?

--
Frederick E. Jorden
http://Tax-Accounting-Payroll.com
7825 Midlothian Tpk - 207
Richmond, VA 23235-5247
EMAIL knowtax[at]verizon.net
(804) 320-6210 FAX (804) 320-6211

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- quote -

After reading the above paragraph I take it you're going to
pay the FICA/social security on the compensation and then
pay it to the corporation and then again pay it out in
taxable wages to yourself?

That's counterproductive and will cost you a lot. In fact I
think you ought to contact a local tax professional, either
an Enrolled Agent (EA) or Certified public account (CPA), in
your area. Maybe he can explain it better face to face.

ChEAR$,
Harlan Lunsford, EA n LA

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Drew Edmundson wrote:

- quote -

And I would recommend he even save his money an attorney
might charge for the consultation, and not even consider
such a thing. (grin)

ChEAr$,
Harl

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"raylopez99" <raylopez99[at]yahoo.com> wrote:

- quote -

The IRS is not questioning the right to form a Corporate
Sole. What they object to is the alleged tax benefits.
Plenty of promoters of Corporate Soles are now or have been
guests of a federal penitentiary.

AFAIK all states allow professions to form a professional
corporation that has one owner. But this is NOT a Corporate
Sole.

---
Drew Edmundson, CPA
Cary, NC

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MoTHIS THREAD IS CLAOSED AS OF TODAY
============================================
raylopez99 wrote:

- quote -


I went to that link and found this:

**BEGIN QUOTE**

Wikipedia is not an advertising service. Promotional
articles about yourself, your friends, your company or
products; or articles written as part of a marketing or
promotional campaign, may be deleted in accordance with our
deletion policies. For more information, see Wikipedia:Spam.

**END QUOTE**

- quote -

I wouldn't trust you as far as I could throw the building my
office is in. And, no you don't and no it isn't.

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- quote -

Hi Drew--certain states, CA being one of them, allow certain
professions the right to form a corp. sole (and you don't
even have to be a priest, rabbi or shaman).

RL

PS--after doing lots of due diligence, I've concluded that
it's probably better to pay FICA/Social security taxes on
any "taxable compensation" and pass through said
compensation as "wages" rather than try to use said
compensation to fund a retirement plan. Of course up to 25%
of said "taxable compensation" could be used to fund a
retirement plan (401k/ SEP-IRA, etc) and I might declare a
special dividend this year, and avoid paying FICA/SS tax
that way.

Thanks.

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"raylopez99" <raylopez99[at]yahoo.com> wrote:
- quote -

I apologize if this is a duplicate. It did not post with
the rest of the messages today and I sent it early
yesterday.

See the IRS' Dirty Dozen, number 7:

http://www.irs.gov/newsroom/article/...136337,00.html

If this is what you mean by "sole corporation" then I
recommend you speak with a tax attorney with criminal
experience ASAP. If not then please elaborate.

---
Drew Edmundson, CPA
Cary, NC

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"raylopez99" <raylopez99[at]yahoo.com> wrote:
- quote -

See the IRS' Dirty Dozen, number 7:

http://www.irs.gov/newsroom/article/...136337,00.html

If this is what you mean by "sole corporation" then I
recommend you speak with a tax attorney with criminal
experience ASAP. If not then please elaborate.

---
Drew Edmundson, CPA
Cary, NC

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raylopez99 wrote:
- quote -

What's to explain? EXcept of course I jokingly referred to
myself AS a corporation, which can't be of course. Legally
I exist and the corporation I own exists, as separate person
under the law. IOW, a natural person cannot be a
corporation.

As for that "sole corporation" thingy, that's a whole
'nother ballgame.

ChEAr$,
Harlan Lunsford, EA n LA

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Harlan Lunsford wrote:
- quote -

Harlan--kindly please expound

Assume this fact: I am a sole corporation (see here:
http://en.wikipedia.org/wiki/Corporation_sole)'

Trust me--I have clearance from the IRS and it is 100% legal
(long story).

RL


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