Forming CA S-Corp

[Vicious]

Myself and a 50% partner are launching a company very soon and through our research we feel that an S-Corp will give us the best tax advantages as well as protect our personal assets.

This is a retail sales business, mfg, as well as labor services (installers).

The current plan is to file S-Corp along with a 2553 that would set it up as a partnership and thus be just a tax reporting entity and not a tax payer. In this instance the taxes would be paid as income by the shareholders.

I am still researching CA regulations as we might try to HQ in NV for various other tax reasons.

My main focus on the S-corp currently is that we will incur some pretty heavy startup costs and due to the structure those losses can be deducted from my personal income tax earnings from other ventures.

The limited number of shareholders isn't an immediate concern for us though it might be in the mid-range future, if things work out and we take on an IPO. Is this something to worry about now, or a 'deal with it later' type of issue?


Thoughts on the situation? I'm sure the answer is yes, no, maybe, talk to a tax attorney. But do you see any major oversights here? Things I should be aware of, or major benefits other structures offer?

 

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[Diane Kennedy]

General thoughts, but first the warning. These are just general comments. I really recommend that you discuss your particular case with a CPA or tax attorney.

- S Corp is a good entity for start-ups. It allows you to flow through losses if there are some at the beginning and getting money out isn't as difficult as with a C Corp. You could also do an LLC, electing to be taxed as an S Corp.

- WIth partners, I sometimes suggest an LLC, default tax situation. Each member (partner) has their own interest then held in their very own S Corp or C Corp. This allows them to put in place their own benefit programs that are customized to just them.

- You have a Nexus issue, whether you know it or not. I'm going to do a thread on this because this has come up more than once on the forum - just some misunderstandings on how that works.

 

[Vicious]

I agree on the nexus issue as our primary biz will be in CA. But my thoughts was when it comes to being a dist/mfg and shipping things out of state, you have some benefits there.

That or we might setup the "asset company" that will own everything in NV. Have the main biz lease the equipment from this company etc.


The more I research these things, the less I really know which direction to go. Thought I get the feeling we want to avoid the franchise tax assoc with an LLC.

Yeah... I think it's time to sit down with a tax atty.

Anything I should specifically be concerned with, ask about, etc? I don't want to go into this totally blind.