I am a Independent Info Tech Contractor in Virginia. I want to switch to Corp-to-Corp but which one?

Question

Which type of corportion is best to form and what are the benefits? I am looking for better tax benefits and write-offs.

Answer 1

C-corp, income, expenses, profits, losses stay with the corporation, and the corporation pays all the taxes. The only way you can get money from the corp is through dividends, which aren't deductible expense to corp, but are taxable income to you.

Other choice is an S-corp. All income, expenses, profits losses pass through to you via a K-1 and are reported on your income tax return, 1040.

C-corp on has federal tax if federal income, state tax depends on the state, Massachusetts has minimum $456 tax whether corp makes profit or loss. S-corp has no federal tax, but state tax depends on the state, MA has $456 tax for s-corp as well.

No real tax benefits and write-offs either way, although with C-corp charitable contributions are limited to 10% of taxable income before contributions, with s-corp charitable contributions flow-through to shareholders, but are subject to shareholders tax limits.

Answer 2

In 1849 there were people that sold a type of oil that was reported to collect gold from the ground if you spread it on your body and rolled around for a while. LLCs, Limited Partnerships, and S Corps for most small business owners make about as much sense. They may provide some protection of your personal assets but insurance can do that for far less money. In some states a corporation or partnership is charged a base tax regardless of their tax liability. For example in CA you pay $800 if you would have no tax liability otherwise. If you plan to form one of these please send me your order for a deluxe “Gold Oil Kit”.

Answer 3

Forget setting up a corp to save on taxes. You generally won't, and in many cases will pay more. You'll certainly introduce a level of complexity into your business that will probably cost you more in legal and accounting fees along the way.

A corporation is a legal entity that is used to isolate the owers of the business from personal liability for the actions or omissions of the business. Unless your business venture exposes you to significant risk of suit for malfeasance (like a physician, for example) incorporating will be a needless expense with little or no benefit.