Has anyone Incorporated their small business? Or an S corp? In Calif?

[jdc]

Im a freelancer/sole owner and all the work Im doing is contract based. Im in CA and getting killed by taxes. CA hammers small businesses.

anyone care to share their knowledge or experience? good or bad?

Anything else people would like to share?

I see legalzoom does it?

TIA

[mattkime]

>>CA hammers small businesses.

Its my guess that they simply expect small businesses to pay the same taxes that any other business needs to pay.

I think I've had a conversation with MAVIC on how incorporating can cut your tax bill. Its a bit of a game - your corp pays you a salary (taxed as income tax) and you get a disbursement from your corp that is treated like investment income.

talk to MAVIC to get more info. what i said might be wrong.

[dmann]

I'm incorporated, but I'm in IL. Not sure that I really come out ahead on taxes but my reasons for incorporating were not tied to finances. While I don't have the self employment tax, I do have a slew of taxes I need to pay as a corporation and for my "employee" (me.)

I am lucky that I have a CPA friend who ran all the numbers with me before I decided to incorporate. It might be worth some consultation time with a good tax person to decide what is best for you.

DM

[jdc]

CA is the 50th worst state to run a small business in =(

Tax rate is 33%.

[GGD]

jdc wrote:
CA is the 50th worst state to run a small business in =(

Tax rate is 33%.

How are you computing that?

https://www.ftb.ca.gov/forms/2011_Califo...r_TaxRates

[DRR]

I do not have CA specific information but I have an S-Corp. I had my CPA run numbers for me before I incorporated.

The rough estimates, based on $100k revenue, was something like $59k net if I was self employed, $85k net if I incorporated and drew both salary and shareholder distributions. I had a low, but not ridiculously low, salary as an employee, which saved me quite a bit.

My recommendation for you is that you have a CPA handle all the paperwork. It's a LOT. It's federal and state paperwork, including all types of taxes and having to pay unemployment insurance, way too much and way too complex to DIY correctly. Not something you want to make a mistake on.

[Robert M]

DRR,

I can't speak for the savings but I'll say quoted for truth when it comes to having a CPA handle the details. That and bring an attorney on board as well. These, like all other legal documents, should be handled by a reputable professional.

Robert

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When I decided I did not do enuf bus anymore, the $800 a year Calif. Corp. fee was just stupid. Call your acct. and lawyer.