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S Corps are Amazing! Gonna Git Me One..

Discussion in 'BlackHat Lounge' started by silentthunder, Apr 5, 2012.

  1. silentthunder

    silentthunder Jr. VIP Jr. VIP Premium Member

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    My buddy is a rap and film producer in Florida. His company is an S Corporation. Cost him $60 and 3 days to get it set up. Wow. Not only does he have full corporation rights he can do fund raising (white hat). We're doing some charity work out West. It would take 6 month and thousands of dollars to start a non profit organization. Gotta get me an S-Corp too! In 5 years you can have a public offering.
     
  2. teeniegenie

    teeniegenie Supreme Member

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    Anyone can do fundraising, corporation or not. I hope your friend isn't telling people they get some type of tax deduction if they contribute to your fund raising efforts.

    You're right about the time and cost for a 501(c)(3) designation.

    Why do you need to wait 5 years for an IPO? FYI - most investors involved with IPOs are dealing with C-Corporations out of NY or DE.

    Good luck!
     
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  3. bushbabie21

    bushbabie21 Executive VIP Jr. VIP Premium Member

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    wait till tax time..you are going to have to pay an accountant. I used to have an llc and my accountant charged a bit upwards of $500 to do my taxes...i think s-corp is more complex tax-wise
     
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  4. silentthunder

    silentthunder Jr. VIP Jr. VIP Premium Member

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    Okay that's good to know. I think he said the company he uses to collect funds on his site has a a tax write off feature. Not sure. One thing I know is that as money begins rolling in I'm going to need to lawyer up. I've already experienced sour JVs and this one is gonna be big. It's for a good cause and I don't want to be associated with that type of scam if one of the other 4 guys goes rogue. :cool:

    Why do most people prefer Delaware corps to NY corps?
     
  5. charliebones

    charliebones Regular Member

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    S corps are really simple from a tax standpoint. It's an 1120s and a Schedule K1 which is then passed completely through to your personal taxes. No double taxation like if you were not an "S". Should only cost a few bucks more from a legit tax preparer or accountant. Make absolutely sure you get your application for an "S" designation in right away and have the acceptance letter from the IRS handy when you do your taxes, otherwise it can be a real headache.

    The great part is, if you are employed AND have a "S'' corp side business, you can reduce the amount of taxes you pay personally by taking business losses against your employment income :)
     
  6. silentthunder

    silentthunder Jr. VIP Jr. VIP Premium Member

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    Dude that's awesome. I do IM fulltime. Would you say the tax advantages for me are going to be substantial? More than a regular corp?
     
  7. rockong

    rockong Power Member

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    It doesn't make sense for anybody who does IM full time to be a C Corp. A C corp has so many more duties to perform, plus they get taxed twice, once on the corporate level and then on your individual level. You also have to have very good records of shareholder meetings, etc.

    S Corps and LLCs are the way to go if you want to save the most trouble for taxes. S corps will have K-1s distributed that'll flow directly into your 1040.

    I prefer LLCs because if you're just a single member LLC, then you're just considered a disregarded entity. Everything is done on Sch C of your 1040 and you won't even have to worry about completing a 1120S return then distributing your own K-1. It's such an extra hassle.

    As a side note, S Corps cannot IPO. Once you're over 100 shareholders, you're automatically a C Corp.
     
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  8. Enigma32

    Enigma32 Jr. VIP Jr. VIP Premium Member

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    With a regular (c corp) the business gets taxed then you get taxed when your business pays you, thats what he meant by double taxed. With an S corp designation the profits passthrough straight to you so it gets taxed only once.

    If your buddy is claiming to be a non profit or that the donations are tax deductable as if he is a non profit then he is walking into legal troubles. It is no different then taking the donations straight to his own name.

    You're kind of ignoring the answers here.. your buddy is not "possibly" doing something shady, he IS doing something shady.

    Delaware is preferred due to loose laws, nevada is another one growing in popularity. Nevada actually provides a guarantee against your corporation getting pierced. What that means is if someone sues your business, they don't want you to take all the money and walk away saying "gone broke, sorry bub" so they try to pierce it to come after you personally. Nevada provides extra protections against that as long as your ducks are all in a row.
     
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    Last edited: Apr 5, 2012
  9. charliebones

    charliebones Regular Member

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    Absolutely. Especially if you are making money. As a regular corporation, you pay taxes as a corporation on your profits and then you pay taxes AGAIN on what you make as an individual, if the corporation is paying you or if you take a share of the profits. With an "S' you only pay once and only if you show a profit. As an individual, you can write of virtually everything within reason against your profits and reduce your taxes as low as possible. You can also set up a retirement plan for yourself. Don't forget though, if you don't have a regular job, you have to pay Social Security tax for yourself at the higher rate.

    The best rule of thumb for an accountant is to ask him or her what THEY paid in taxes last year. If it's anything more than $0, don't use them :)
     
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  10. silentthunder

    silentthunder Jr. VIP Jr. VIP Premium Member

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    Thanks purecig, very helpful info however you're misinformed if you think I'm ignoring answers or that my partner is cheating. No one is pretending to be a non profit. Lawyers and accountants are involved from the start. We're raising funds for a high profile charitable event with the S-Corp. Meanwhile we're in the initial stage of a Non-Profit formation.

    Also I'm talking about two different things. The charity corp in which I'm a partner and my separate IM business.
     
    Last edited: Apr 5, 2012
  11. silentthunder

    silentthunder Jr. VIP Jr. VIP Premium Member

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    Thanks and rep given.
     
  12. Enigma32

    Enigma32 Jr. VIP Jr. VIP Premium Member

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    Ah, I understood it like some others posting before me that he is basically taking non-profit style donations but is a for profit llc.
     
  13. silentthunder

    silentthunder Jr. VIP Jr. VIP Premium Member

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    No. Wealthy corps and orgs aren't interested in donating to corporations without a 501. It's a sign of non professionals. We have an S Corp. The event is gaining attention and meanwhile we're losing time and rep by not being able to accept donations. We have to find a trustworthy non profit org that will allow us to collect donations with their 501 in exchange for 10% of the donations. Maybe a church but church. Our lawyer says that is legal. He also says, as others in other threads have said, that all shelf non profit corps are illegal. *sigh* lol
     
  14. Enigma32

    Enigma32 Jr. VIP Jr. VIP Premium Member

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    Shady, but legal. There are plenty of 501's who just suck at raising funds. Accepting 10% of $1,000,000 raised by someone else is better than 100% of $0 raised on their own.

    When all the DNC laws passed nearly killing the telemarketing game, a number of them adapted by exploiting the loophole allowing non-profs and politicians to basically disregard those laws. When all those telemarketers call people asking for "police" donations, they are doing exactly what you are talking about. They offer 5% or whatever to the 501 in exchange for the right to raise funds on their behalf.

    Knowing that, I'd assume you can find some leads that are more than happy to take your 10% offer as well.
     
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  15. silentthunder

    silentthunder Jr. VIP Jr. VIP Premium Member

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    Thanks for clarifying that. I live in that shady, gray zone. Otherwise I'd have a 9 - 5 and 2.5 kids. You seem like a veteran on these matters.
     
  16. Enigma32

    Enigma32 Jr. VIP Jr. VIP Premium Member

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    Nah, but I understood that you're having trouble finding a non-prof to make a deal with. What I was trying to say is that telemarketers have already beaten that path for you and have non-profs entering precisely that arrangement with them. I know there's guys on here who work in that area, that might be the way to find what you're looking for.
     
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