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  1. #1
    Join Date
    Oct 2010
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    5

    Default What are the Benefits of Starting a Corporation

    My question involves business law in the state of: NY

    Hi All,

    Do you think that having corporation can saves me few bucks on tax returns and how?

    Also, i do few stock investments. Do you think that i can start a corporation that does stock investments? Would this help me save more money and how?

    Any suggestions/links/blogs or anything are greatly appreciated.

    Thanks in advance..

  2. #2
    Join Date
    Mar 2008
    Posts
    1,995

    Default Re: Starting Corporation.whats the Benefits

    Quote Quoting GoGiants
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    My question involves business law in the state of: NY

    Hi All,

    Do you think that having corporation can saves me few bucks on tax returns and how?

    Also, i do few stock investments. Do you think that i can start a corporation that does stock investments? Would this help me save more money and how?

    Any suggestions/links/blogs or anything are greatly appreciated.

    Thanks in advance..
    NO.

    I'm in NY, NYC, and I owned businesses through C Corp, S Corps, as well as an LLC. For each business entity, you'll need to file a variety of local, state, and Federal tax returns. There are minimum franchise taxes due in cases where there is little or no income. The only logic I can see is the deduction of business expenses, and you can already do that personally if they are logical business expenses.

    Stock investments, as well as rental properties that I'm in are investment income where you are not taxed for social security, but gets very complicated through a corp. Then you have to file tax forms on time. At one point I operated through a number of companies, did lot of the bookkeeping myself, and found myself delinquent in filing some returns, and have to pay fines.

    Why do you want to make life so complicated.

  3. #3
    Join Date
    Oct 2010
    Posts
    5

    Default Re: Starting Corporation.whats the Benefits

    Thanks, point taken..

    Is there any other way to create company with minimum amount of money?

  4. #4
    Join Date
    Mar 2008
    Posts
    1,995

    Default Re: Starting Corporation.whats the Benefits

    Quote Quoting GoGiants
    View Post
    Thanks, point taken..

    Is there any other way to create company with minimum amount of money?
    Generally, I am not aware of any "minimum" requirements under NYS law, though I was surprised a few years ago when I got a notice from the NYS Tax department imposing a "fine" of several hundred dollars on me with a letter explaining the state requires "C Corporations" to have assets of at least $1,000.00.

    I used a commercial tax package which prepares "State" taxes, and it did not flag the error. My CPA was also flumoxed, and had to check the regulations, and he confirmed it is a valid regulation.

    So I called the state, and the NYS Tax department told me simply to include additional assets, such as furniture, amend the returns, and they would cancel the fine. I did so, and the fine was cancelled.

    Now, for certain regulated businesses, such as insurance companies and banks, there are minimum capital requirements, but I assume you are not opening up a bank.

    Generally speaking, if the intent of the "corp" is to limit personal liability, then putting little or no money into the entity would defeat this purpose, as those seeking to "pierce the corporate veil", i.e. hold you personally responsible if things go wrong, would point to this non-existent capitalization as evidence it is a sham entity. The rule is depending on the size and scope of the business, to capitalize it enough and buy enough insurance that fits the size of business that you operate.

    I used my "C Corp" to do property management, to essentially pay for my personal benefits, and I capitalized it with only $1,000, and always had more than $1,000 in the bank except for that one year I didn't keep track of things, and let it slip below. Now, I haven't had anyone suing me, but if the company was engaged in activities that may entail risks, something goes wrong, someone can always point to the $1,000 as a sham.

    However, my company was only used to collect management fees, from my other businesses for my expertise, then pay me for perks that I normally cannot personally deduct, such as health insurance and co-pays, these activities only affects me, so there is no one out there suing me for fraud, except me.

  5. #5
    Join Date
    Oct 2010
    Posts
    5

    Default Re: Starting Corporation.whats the Benefits

    Thanks,

    I am a web developer and i have been thinking of creating a company that relates to my filed of work- either web development company or consulting company. The reason why i said with "minimum" money is because I'm not sure if would be able to make any money with this company and i don't want to lose too much money if things don't work out as I wanted to. Basically the competition is huge and i also have full time job so I am not really confident that this company will earn much money. But i really like to try...And if i see light in the tunnel that i would like to take it to higher level.

    So any suggestions that can help me are strongly appreciated .

    Thanks in advance

  6. #6
    Join Date
    Mar 2008
    Posts
    1,995

    Default Re: Starting Corporation.whats the Benefits

    Quote Quoting GoGiants
    View Post
    Thanks,

    I am a web developer and i have been thinking of creating a company that relates to my filed of work- either web development company or consulting company. The reason why i said with "minimum" money is because I'm not sure if would be able to make any money with this company and i don't want to lose too much money if things don't work out as I wanted to. Basically the competition is huge and i also have full time job so I am not really confident that this company will earn much money. But i really like to try...And if i see light in the tunnel that i would like to take it to higher level.

    So any suggestions that can help me are strongly appreciated .

    Thanks in advance
    I've been a "systems analyst" and an "IT Consultant", and I have an "S Corp" for a number of years that I used to conduct my activities. There are "no minimum" capital requirements for "S Corps" that I am aware of, though for quite a while, there's been minimum franchise taxes for NYS/NYC, that I thought was high ( $600/year even if you have no income) , though this has come down in recent years, and I'll have to pull tax returns for inactive years to see what they are currently.

    I also had an LLC for a business I operated, but I found the publication requirements costing $1,500 to open the LLC, and the annual $500 fee for a two member LLC a bit high. If you choose to have the LLC taxes as a proprietor or partnership, there are no minimum capital requirements.

    If you are looking to hide behind a corporate entity if you did the work, in your case WEB development yourself, you can't, as customers would sue you personally. In my case, I found that the corporate entity would make me appear more professional to my customers.

    However, you can also personally operate through a DBA to look more professional without the formalities of corporate entities, such as getting an EIN number or filing corporate tax returns etc.. I opened a business as a DBA during my college years doing mail order. You'll have to check with your bank to see how they what you to handle checks issued to a DBA, whether you can deposit it personally, or if you'll need a bank account for that DBA. My college friends paid me in cash, so I did not have that problem.

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