Q:

Subject: Great S vs C article

 

Hi,

 

This is a very good article.  But I still don't know if I should covert to S corp or not.  I work full time.  And I also have a C corporation.  I have been doing very little business since I got my full time job, this year the business made about 5300 and I actually had to put in 3500 from my pocket into it.  I just finished doing the Turbo Tax Business for it, and it turned out to be 1300 loss.

 

So if I understand this correctly, and this was an S corp, I could somehow show that loss on my personal return? 

 

Do you think it would be best for me to convert to S corp?  Would it make any difference at such a small level and I'm the only owner.

 

Also is there anywhere I need to say on my personal or corporate return that I loaned my business 3500 last year?

 

Thanks,

A:

If you are serious about operating a business, you absolutely need to be working with a tax professional who can properly guide you.  No information on the internet or from strangers like me can do the proper job for what you need.  Neither can a tax prep program like TurboTax substitute for competent professional guidance.  This is especially true with corporations, about which you obviously don't understand the fundamental basics.

As I've explained on my website, C corps pay taxes, while the net income or loss from S corps is passed through to the 1040s of the shareholders. 

The other thing you need to do ASAP is get your corporation properly set up on a double entry accounting system, such as QuickBooks.  Corporations are required to include balance sheet info as well as a P&L with their annual income tax returns.  Loans from shareholders will be disclosed in the Liabilities section of the Balance Sheet.

Good luck.

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/12/2006 11:08:00 AM Send this post: