Q:

Subject: Questions on S & C Corps

I found your blog and web site trying to find via Google an answer to the following:

An S Corp business owner wants to establish a benefit plan for employees that have at least X years of service, and that benefit plan is available only to C Corps. 

 1.  Can the S Corp owner establish a C Corp and use it to provide the benefit assuming all employees of the S Corp that qualify with X years of service are included?

 2.  If Yes to #1, could the S corp simply pay the C Corp for the premium cost of the benefit so that the C Corp's income and expenses net to $0, with no tax liability?

 3.  If No to #1, as there any other way to accomplish the desired result and still allow the bulk of the business and taxable income to be in the S Corp?

4.  Can a C Corp own an S Corp?

 5.  Can an S Corp own a C Corp?

 THANKS in advance if you can help me.

A:

There are ways in which you can use multiple corporations to achieve the desired benefit coverage.  Unfortunately,
there are far too many options to consider and possible scenarios that can be used to achieve your goals for me to even begin giving you specific advice via this medium.

You will need to work directly with an experienced tax pro who can analyze your unique circumstances. I wish I could help; but I already have too many clients to take care of; so we are still trimming back on the difficult clients and are not accepting any new ones at this time. 

Unfortunately, we don't have anyone to whom we could refer you. If you haven't already done so, you should check out my tips on how to select the right tax preparer for you. 

As a CPA yourself, it would be an excellent investment for you to acquire one of the excellent reference books on corporations from QuickFinders and/or TMI so that you can better familiarize yourself with the basic rules, such as who can own shares in each type of corp and what kinds of benefits each type of entity is eligible to offer its principals.  I have links to both companies' sites on my blog.

I wish I could be of more assistance; but I wish you the best of luck.  

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 7/21/2006 12:39:00 PM Send this post: