There is still no shortage of confusion over the differences between C and S corporations, as I’ve been trying to explain for so many years now.  Some typical examples:

Q:

Kerry,

 I saw your article on C Corp vs. S Corp on your website. I am a CPA with a handful of small business clients. I have a real estate broker client wanting to incorporate. My gut reaction was to recommend S Corp due to double taxation but after reading your article, I am second guessing myself.

I'm tempted to recommend C Corp so that she can deduct her health insurance and other out of pocket medical expenses thru corp. I assume we could take care of the double taxation issue at year end by bringing the profit down by either additional wages or retirement plan contributions. Any advice would be appreciated.

A:

We have dozens of Realtor clients who are saving huge amounts of taxes for all of the reasons that I spell out in that piece contrasting C & S corps, not just the health insurance.

Kerry Kerstetter

 

Q:

Hi Kerry,       

        I'm in North Carolina my CPA advised me to start an S-Corp and I did

so.   I'm a recruiter and have little overhead and have billed around $36K

my first qtr.  What are your thoughts on this?  Should I have started a

C-Corp instead?

A:

I really don't have enough information to be second guessing your CPA.

However, I do frequently find people jumping into S corps without properly thinking things through.  If your CPA didn't take into consideration the various points I covered on my web page comparing S & C corps, he may have steered you wrong.

More often than not, a profitable business can save huge amounts of taxes by using a C corp instead of an S.

Good luck.

Kerry Kerstetter

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/20/2005 09:40:00 PM Send this post: