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Old 07-01-2010, 08:01 AM   #1
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Default Best Business Entity in Florida

I've been doing a lot of research but would like an opinion based on my circumstances, thank you in advance for the help.

I am starting a business. I have another job already and make a salary of around $160K per year, married with one kid, my wife and I file jointly, I am the only one working in our household.

I anticipate the new business will likely earn $25K - $50K in revenue the first year of operation. I plan on re-investing all of the profits into the company and/or paying shareholder-employees wages. Those shareholder-employees would be myself and my wife. I plan on having no "regular" or more correctly non-shareholder employees for the first two years.

From what I can find it seems the best course of action to minimize my tax liability is to form a regular "C" corp. My reasoning is that shareholder-employee salaries from what I can tell are not subject to double-taxation as long as they are "reasonable" and not paid out as dividends. Federal income tax bracket for the corporation would be 15% up to $50K. My personal tax bracket is much higher and I fear would go up if all corp income flows through to my personal tax return.

Please let me know:

1) if I am incorrect in any of the above information, if so what is the correct answer

2) is it correct that overall tax liablity would be less than a sub-S because I would not be required to show all corporate income as personal income (my thinking is that because I am already in a high tax bracket personally that this additional corp income would push me even higher in the tax bracket regardless of how much I actually take out of the company because all money in a sub-s flows through to my personal income)

3) if I pay myself from the corporation at a "reasonable" rate as a shareholder-employee, am I required to pay personal income tax on the amount of money I am paid? I have read this arrangement avoids double-taxation but I am unclear how this is accomplished. Is the tax avoided because it becomes an expense for the corporation meaning the corp doesn't pay tax on the money but I still would? Or does the corp pay the tax on the earnings and I don't?

Sorry for the very specific questions and I hope my information is not wildly off base. I am looking to incorporate in either Nevada or Deleware but will be operating the business out of Florida. I do realize I would have to pay corp taxes in FL for operating here but for simplicity am leaving that out of this post.

Regards,

Roy
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Old 07-01-2010, 06:53 PM   #2
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Default Re: Best Business Entity in Florida

Your bracket cant go up too much higher can it?

It is true that C corp will stop the income flowing to you and your personal income tax return.
But frankly I would have a tax advisor review ALL your details.
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Old 07-01-2010, 06:55 PM   #3
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Default Re: Best Business Entity in Florida

You might also check on our partner site: the H & R Block web site for 20 dollars: HR Block Tax Advisor link --

Taxes Online & E-file - Ask a Tax Advisor - H&R Block At Home ™
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Old 07-06-2010, 02:26 PM   #4
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Default Re: Best Business Entity in Florida

Thank you both for the advice. I have scheduled an appointment with a CPA and will let everyone know what they say... just in case someone else has a similar situation someday.

Best,

Roy
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Old 07-06-2010, 03:28 PM   #5
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Default Re: Best Business Entity in Florida

Actually i just found this page and I am interested.
Will look forward to what you say.
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Old 10-08-2014, 01:10 AM   #6
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Default Re: Best Business Entity in Florida

As per Florida (FL) Secretary of State - Business Entity Search LLC suites your requirement better.
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Old 08-30-2016, 11:11 AM   #7
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Default Re: Best Business Entity in Florida

I agree stick with the LLC!
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