Trading Shell Corporation for Taxation Purposes (35% vs 39.6%)

[MRBRETTONWOODS]

http://www.entrepreneurrookie.com/b...er-your-startup-business-as-an-llc-or-s-corp/

"As the name implies you are financially liable for whatever percent ownership you hold in the company. The more you own, the more you're liable for and vice versa.
You're subject to quarterly self-employment Tax payments if you're the only owner in the company.

The LLC must remain an independent active entity in the eyes of the IRS. You can't manage business affairs of the LLC as your personal business. Unlike a sole proprietorship where the business and the owner are the same, an LLC must be mostly separted from it's owner and show a business operating profit or loss. The owner also cannot legally use profits from the business for personal expenses. You can only do so from your own salary only if the LLC generates enough profit to create salaries.

"

For Capital Gains, self-employment, etc. tax isn't relevant, but the message is that you should keep personal expenses separate, but if you can double personal/business expenses such as for housing/automobiles/technology/furniture, etc. then you may not need to take much money out of the corporate entity in the first place and fork over the 4.6%.

 

[newwurldmn]

Quote from MRBRETTONWOODS:

You will be double-taxed if you choose the election, the question is how much of the money you can keep in your corp to use it as a cover for yourself without having issues, i.e. you can have the corp pay for housing, automobile, technology etc. expenses and save 4.6% of your income. So for most expenses, you would be using your company card instead of your personal card, for example.

I don't think it's worth your time.

Like I said before, most operating business owners would rather be an s corp than a
C corp and they have real advantages to being a c corp (easier to sell, etc)

 

[MRBRETTONWOODS]

Quote from newwurldmn:

I don't think it's worth your time.

Like I said before, most operating business owners would rather be an s corp than a
C corp and they have real advantages to being a c corp (easier to sell, etc)

You can still have an LLC, but then simply choose to be taxed as a Corporation. This way if you keep most of your assets in the LLC, you pay only 35% instead of 39.6%.

 

[newwurldmn]

Quote from MRBRETTONWOODS:

You can still have an LLC, but then simply choose to be taxed as a Corporation. This way if you keep most of your assets in the LLC, you pay only 35% instead of 39.6%.

What's the point though ? To never see that money again?

 

[PlinytheTrader]

Quote from MRBRETTONWOODS:

You can still have an LLC, but then simply choose to be taxed as a Corporation. This way if you keep most of your assets in the LLC, you pay only 35% instead of 39.6%.

How are you going to justify writing off all of your personal expenses as a "business" expense? I am not an accountant, but I am pretty sure you can only write off expenses that are related to your business operations. So that would limit you to internet, telephone, and maybe rent if you actually have a home office in your house. How is food or clothing considered a business expense when you run a shell company with no clients or business operations? Plus, you aren't addressing the big issue of having all of your trading gains locked in your corporate entity. You will be stuck not being able to touch your profits without having to be double taxed. Just bite the bullet and deal with the 4% increase in your income tax.

 

[MRBRETTONWOODS]

Quote from newwurldmn:

What's the point though ? To never see that money again?

So you can keep your major assets in the shell corp, while paying less in income tax (35% vs 39.6%) on those assets.

 

[MRBRETTONWOODS]

Quote from PlinytheTrader:

How are you going to justify writing off all of your personal expenses as a "business" expense? I am not an accountant, but I am pretty sure you can only write off expenses that are related to your business operations. So that would limit you to internet, telephone, and maybe rent if you actually have a home office in your house. How is food or clothing considered a business expense when you run a shell company with no clients or business operations? Plus, you aren't addressing the big issue of having all of your trading gains locked in your corporate entity. You will be stuck not being able to touch your profits without having to be double taxed. Just bite the bullet and deal with the 4% increase in your income tax.

That's why I said a certain portion would be allotted to personal expenses in the form of your individual income (which would be taxed again), like 20k or something like that, but the bulk of your assets could be in the corp. The corp would reinvest the profits for future trading without going through double taxation.

 

[newwurldmn]

Quote from MRBRETTONWOODS:

So you can keep your major assets in the shell corp, while paying less in income tax (35% vs 39.6%) on those assets.

But you can't access the money for anything without paying an additonal 20percent tax. So you are much worse off if you ever want to take the money out of the corp.

If your goal is to NEVER take the money out then start a foundation or something instead and pay no taxes.

 

[MRBRETTONWOODS]

Quote from newwurldmn:

But you can't access the money for anything without paying an additonal 20percent tax. So you are much worse off if you ever want to take the money out of the corp.

If your goal is to NEVER take the money out then start a foundation or something instead and pay no taxes.

But you wouldn't necessarily need to take that much out in the first place.

 

[PlinytheTrader]

Quote from MRBRETTONWOODS:

That's why I said a certain portion would be allotted to personal expenses, like 20k or something like that, but the bulk of your assets could be in the corp. The corp would reinvest the profits for future trading without going through double taxation.

You will still have to pay the 35% corp tax on any income your corporation makes each year. So yes you won't be double taxed, but you are still paying taxes on money that you can't touch. And whenever you do decide to pull the money out, you will still have to pay another 39% on that same money.