what is the tax advantage to be incorporated?

Question

I own a piece of property and think that I could incorporate thereby reducing taxes; is this true or is there a better way? How do people with a lot of money avoid paying big taxes?

Answer 1

You can cut your social security tax in 1/2 if you have the right accountant. I just switched from a sole proprietor to a s-corp and I will save over $7K in taxes.

There is a lot of over head where you must pay yourself dividends and do payroll. The payroll company only charge about $40 a month. That's cheap. Quarterly payroll taxes are withdrawn from your checking account.

It is best if you use a software like Quickbooks to keep track of all of your expenses and income.

I would not attempt this with out a well experienced accountant.

You can also protect your personal assets. But, you should get some errors and omission insurance to cover any claims.

Answer 2

Your skill to take deductions is an identical whether you're included or no longer. Deductions are consistent with what's "hardship-free and mandatory" to the business enterprise you in. An hour or 2 of an accountant's time (or an enrolled agent's time) could supply you a extra advantageous thought of what archives you should be protecting. Eg, which mileage would be probably deductible in case you hold a mileage log. Incorporating frequently provides to your expenses as you're able to be able to desire to now report a a company return on the federal and state ranges. in case you pay your self, you're able to be able to desire to take action on a W-2 and meaning payroll kinds and federal deposits. If the corporation exhibits a earnings that gets taxed and a few states will upload a "franchise fee" whether or no longer you have a earnings. (California is the worst--$800 a 365 days.)

Answer 3

I think tax benefits are being confused with potential legal (collection) benefits. When you say property, I assume you are talking about rental real estate. Based on that assumption, this is a passive activity with an appreciating asset. It is unwise from a tax standpoint (very) to put an appreciating asset into a Corporation. You are setting yourself up for double taxation at the Corporate and Individual levels. Additionally, many people defeat whatever protections they may have had within a corporation by not properly titling the asset to the Corporation.

If you are looking for a legal shield for the asset, you may want to look at an LLC. This would allow the activity to be on your tax return (preferred) with similar asset protections of a Corporation.

Answer 4

The advantages to a corporation are more legal than tax related.

>>>How do people with a lot of money avoid paying big taxes?<<<
They don't. The top 50% in earners in the country pay about 95% of the income taxes.

Answer 5

The advantage is that your PERSONAL assets are protected. Even if it is a closely held corp (you own all of the shares). How do you think Donald Trump was able to recover from two business bankruptcies?

Answer 6

Not as much as the cost,but you cant be sued for your personal property.