Steps involved in becoming incorporated so I can be paid on C2C
What are the steps involved in becoming incorporated so I can be paid on a Corp to Corp (C2C) basis?
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Got to your Secretary of State webpage of your state of operation and look for Business Entity Type Filings. May not say this exactly, but should be something similar. Your question is quite vague, but here are 4 business types you can research so you can decide which to choose:
Sole Proprietor - One person and if you get sued in connection with services performed, they likely can come after your personal assets. You would file business income and expenses with personal tax return.
Sole member LLC - One person and if you get sued in connection with services performed, they are suing the LLC (business), not you personally, therefore potentially protecting your personal assets. Separate business tax return which produces a K-1. You would file the K-1 with your personal tax return.
Multi-member LLC - Multiple people forming a partnership. If you get sued in connection with services performed, they are suing the LLC (business), not the partners personally, therefore potentially protecting your personal assets. Separate business tax return which produces a K-1 for each partner. Each would file the K-1 with your personal tax return.
Sub-S corp. - For larger business, typically with a board of directors, regular meetings where minutes are taken, and files a separate tax return for the business.
If you are set up as a business and treated as a vendor, you may be asked to file a W-9 with your client and they would send you a 1099 at the end of year if they paid you more than $600 during the year.
Most of it boils down to how many owners you have and the amount of liability you want to assume.
Disclaimer: This is intended as general information and I am not a lawyer. I suggest you contact a lawyer to assist getting it set up correctly in your state.
Sole Proprietor - One person and if you get sued in connection with services performed, they likely can come after your personal assets. You would file business income and expenses with personal tax return.
Sole member LLC - One person and if you get sued in connection with services performed, they are suing the LLC (business), not you personally, therefore potentially protecting your personal assets. Separate business tax return which produces a K-1. You would file the K-1 with your personal tax return.
Multi-member LLC - Multiple people forming a partnership. If you get sued in connection with services performed, they are suing the LLC (business), not the partners personally, therefore potentially protecting your personal assets. Separate business tax return which produces a K-1 for each partner. Each would file the K-1 with your personal tax return.
Sub-S corp. - For larger business, typically with a board of directors, regular meetings where minutes are taken, and files a separate tax return for the business.
If you are set up as a business and treated as a vendor, you may be asked to file a W-9 with your client and they would send you a 1099 at the end of year if they paid you more than $600 during the year.
Most of it boils down to how many owners you have and the amount of liability you want to assume.
Disclaimer: This is intended as general information and I am not a lawyer. I suggest you contact a lawyer to assist getting it set up correctly in your state.
Start by contacting the CA SOS Business Programs division:
https://www.sos.ca.gov/administration/contact-information/#bpd
Phone: (916) 657–5448
Be prepared with your list of questions.
https://www.sos.ca.gov/administration/contact-information/#bpd
Phone: (916) 657–5448
Be prepared with your list of questions.
Just to provide one correction, too:
C corp. - For larger business, typically with a board of directors, regular meetings where minutes are taken, and files a separate tax return for the business.
Sub-S corp. - Smaller businesses can elect for pass-through taxation -- meaning that all profits & losses are passed through to the owner's income tax return directly. This provides the legal umbrella of a C corporation, as well as reducing double-taxation (where income is taxed at the corporate level first, and then again as it passes to shareholders -- i.e. you. There are some limitations -- only available to US citizens and permanent residents, and there are limits on the number of shareholders, as well as possible increased chance for audit if your balance of salary to dividends is not "typical".
Before you start the process, you should discuss with your tax preparer, as this will impact the complexity of your tax returns, and he or she can likely advise you on the best option for your specific needs.
C corp. - For larger business, typically with a board of directors, regular meetings where minutes are taken, and files a separate tax return for the business.
Sub-S corp. - Smaller businesses can elect for pass-through taxation -- meaning that all profits & losses are passed through to the owner's income tax return directly. This provides the legal umbrella of a C corporation, as well as reducing double-taxation (where income is taxed at the corporate level first, and then again as it passes to shareholders -- i.e. you. There are some limitations -- only available to US citizens and permanent residents, and there are limits on the number of shareholders, as well as possible increased chance for audit if your balance of salary to dividends is not "typical".
Before you start the process, you should discuss with your tax preparer, as this will impact the complexity of your tax returns, and he or she can likely advise you on the best option for your specific needs.
I am already incorporated as a Standard Corporation. Corporation earns revenue and pays me. I pay personal taxes on my earnings and the Corporation pays Corporate taxes (if any) on its earnings. This is better (in my opinion) than Sub-S corporation or Sole Proprietor where I am. I am completely separate from my Corporation except that I happen to own it.
The Corporation pays Corporate Taxes so has an Accountant (which you need for any business arrangement).
The Corporation keeps a Minute Book and so needs a Lawyer. This is not expensive but not necessary in Sub-S above.
Minute books are important if you have a spouse or legal partner to take on the business in the unhappy event of your demise.
Setting up my Corporation was fast (1 day) and needed a legal search for my business name. The legal fees are a business expense.
A Corporation can pay everything to you or leave some behind to take later as dividends.
The Corporation pays Corporate Taxes so has an Accountant (which you need for any business arrangement).
The Corporation keeps a Minute Book and so needs a Lawyer. This is not expensive but not necessary in Sub-S above.
Minute books are important if you have a spouse or legal partner to take on the business in the unhappy event of your demise.
Setting up my Corporation was fast (1 day) and needed a legal search for my business name. The legal fees are a business expense.
A Corporation can pay everything to you or leave some behind to take later as dividends.
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