Q:

Kerry,

I am over here in Georgia and I ran across your very informative article on the net. Last year I started my first small business I believe I filed S-Corp. Anyway I made under $20,000 and to my surprise after reading your article I believe I should definitely be either a C-Corp or maybe even an LLC. Anyway, I was wondering what sort of tax bracket would an S-corp fall under if it made under $20,000. I am just doing some math to see if it would make sense for me to change my corporate status or stick with what I am in.

Thanks for your time and I appreciate the informative information you post.

Sincerely,

A:

I'm glad that you liked my article.  However, It looks like you missed the most important point, which is that you shouldn't be setting up any kind of business entity without the proper professional advice ahead of time.  That's the same as prescribing your own medicine without having a doctor diagnose you.

One of the main big differences between S and C corps is that S corps don't pay income taxes, so there are no tax brackets to look at.  Their income passes through to the shareholders' 1040s, and are thus subject to whatever your personal tax brackets are.

I strongly suggest that you consult with a tax pro before making any more decisions of this kind.

Good luck.

Kerry Kerstetter

Follow-up:

Thank you for the quick response.

I am seeking that help right now.

Sincerely,

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 4/14/2005 12:36:00 PM Send this post: