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Frequently Asked Questions | |
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Frequently Asked Questions | |
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That's All Folks
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The process of "incorporation" offers the business owner both legal protection as well as income tax advantages. For the most part, we recommend that the business opt for the S Corporation Election which allows the profit or loss from the business appears and is included on your personal (1040) tax return.
When a corporation is initially formed, it is considered a "C" corporation. The business owner can elect to change the type of corporation from a "C" to an "S" corporation by completing a form and sending it to the IRS.
An LLC offers legal protection but not necessarily tax advantages, whereas an S Corporation offers both legal protection for it’s owner’s/shareholder’s as well as tax advantage. Essentially, the tax advantage is in the form of the profit being exempt from self employment tax (social security).
Recent changes to the State of Florida’s workers compensation requirements require that if a person wants to be workers comp exempt, they must be at least a 10% owner in an LLC or S Corporation. We strongly recommend the S Corporation for both legal protection and tax advantage.
From the time you sign your paperwork, approximately two weeks.
An EIN is otherwise referred to as an employer identification number. This number is issued by the IRS as a result of preparing and filing IRS Form SS4. This is a unique number assigned to your corporation and is entered on all tax returns and filings for your corporation. The Tax Shoppe will obtain and provide you with your EIN as a part of the incorporation process.
A FEIN is the same as an EIN.
If the type of business your corporation conducts involves collecting sales tax or purchasing materials for resale to customers, the corporation must apply for and be assigned a Sales Tax Number by the State of Florida. This number will also come with an Exemption Certificate issued every year and must be provided to your customers and vendors.
Each year the State of Florida requires that the corporation pay a fee of $150 in order to keep the corporation active for the year. This Annual Report also allows your corporation the option of updating the corporate officers and registered agent information. The state sends each corporation a post card where you have the option of paying online using a credit card or filing and sending the payment via US Mail.
Just as the name implies, each corporation must have a "registered agent" assigned to act as the point of contact for all corporate (including legal) issues and this is typically the president of the corporation.
Each corporation has the ability to assign the following positions: President, Vice President, Secretary & Treasurer, as well as a generic position referred to as Director. These positions may be filled by shareholders but is not required.
A shareholder is a person who owns shares of stock in the business that reflects ownership either in whole or in part.
Recent IRS rulings require that the owners of the corporation that actively participate in the day to day operations of the business draw a paycheck. The amount of the pay check is determined as follows: if you, as the owner, had to hire someone to perform your duties and pay that person a wage equal to others in the same type of business in the area.
Employees working for the corporation should also be on the payroll at a pay rate established by the corporation.
Independent contractors must meet a separate criteria whereby payments made to them do not have to have payroll taxes deducted in the same fashion as employees.
The Tax Shoppe can prepare and process your payroll information and generate the necessary reports to the State of Florida and the IRS.
Each new business needs startup money and usually gets that from the shareholders. This is non-taxable income. Prior to taking any paychecks from the corporation, the shareholders should first repay the loans made to the corporation. These are not considered paychecks and should have no payroll taxes withheld or other reporting done to the state or IRS.
Payroll tax returns (IRS Form 941) are due to be filed by April 30, July 31, October 31 and January 31 of each year. The same deadline applies to state of Florida unemployment returns (UCT-6). Calendar year corporate tax returns are due by March 15 of each year for the year proceeding.
Sales tax returns are due to be mailed by the 20th of the month following the month being reported. For example, July’s sales tax return must be mailed by August 20th.
As long as the shareholders agree and the vehicle is used for business, the corporation can make the payments. If the vehicle is titled in the corporation’s name, the insurance will be higher. It can be left in the shareholders name in an effort to keep the insurance cost down.