TomT wrote:

- quote -

Depending on his income, he could avoid self-employment tax on some of
what he brings in being taxed as an S-corp, but not if taxed as an
individual.

Stu

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In article <7dd9f40a-b4e4-44de-a2ad-52a2a52d2a0c[at]c4g2000hsg.googlegroups.com> ,
TomT <tvtanner[at]aol.com> wrote:
- quote -


In the past, a major reason for forming an S Corp was for
liabiliy protection. With LLCs becoming more and more
common and with courts extending corporate liability
protection to LLCs, that reason is fading.


Another reason to form S Corps is to shelter some income
from self employment tax by labeling some of that income
as dividends and not as salary. The IRS has proposed new
rules which would impose SE tax on dividends received by
those working for the S Corp, so that reason might fade soon
as well.


In the meanwhile, the above two reasons are primarily
why S corps form when LLCs might do. There is also
an inheritence issue that might benefit holders or
inheritors of S Corp stock.
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

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I am a business counselor with the Small Business Development Centers
(SBDC) and have a client that I think was given ba advice from their
accountant and wanted to ask others opinions. I am somewhat familar
with tax laws, but since I don't deal with it every day there is no
way for me to keep up with all the rules.

He has been a sole proprietor for several years and in 2006 decided to
setup an LLC for the liability protection. Rather than be tax as a
sole proprietor his accountant suggested that he be taxed as S-
corporation. First I don't know why, it is a landscaping business
with only a few employees and not generating large revenue. Second,
the accountant filed a IRS form 8832, but didnot file a 2553.

1) First do you see any reason why it would make sense to sqitch to a
S-coporation?
2) If he does want to switch to be taxed as a S-Corporation, would you
have to file a 8832 and a 2553, or neither, both, etc.
3) The accountant kept the same EIN as before, would they need to get
a new EIN if they did decided to be taxed as a S-corporation.

Thanks for any assistance.

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >