3 Questions You Need to Ask Yourself Before You Form a C Corp | USTaxAid

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3 Questions You Need to Ask Yourself Before You Form a C Corp

Written by Diane Kennedy, CPA on November 2, 2019

The new darling of tax planning is the C Corp. But before you jump into a C Corp, there are 3 questions you need to ask yourself.

#1: Are you committed to timely and accurate record-keeping?

A C Corporation must have separate records from your own. You can’t commingle funds and because it pays tax itself, separately, you need to do tax planning for the corporation separately from your own. That means you need accurate financial statements. It may be time to finally get a bookkeeper if you don’t already have one or are not trained in accounting. But, the accountant’s financials will only be as good as your records.

Don’t start a C Corp if you’re not prepared to do the record-keeping that is necessary.

#2: Do you need every penny you make to live on?

If you need all of your business net income for your lifestyle, a C Corp probably isn’t going to work for you. The only way you can take advantage of the lower C Corp rate is if there is income left in it at the end of the year. Otherwise, you’re just taking it out in the form of salary, which is a deduction for the C Corp and income for you, or dividends, which creates double taxation.

If you can leave some money in the C Corp every year, you can probably pay a whole lot less in taxes by taking advantage of the flat tax rate now available for C Corps.

#3: Do you have an exit plan for your business?

If you’re not sure what you’re going to do with your business when you’re ready to retire or move on to other things, don’t start one. A C Corp requires an exit strategy.

It’s okay if you don’t have the answer to this last one right now. That’s what we are here for. We can help you.

I’ve found in the case of a lot of tax planning, it’s not really getting an answer to a question that is so critical. The problem is really that you don’t know the questions to ask because you don’t know what you don’t know. You’re not sure WHAT to ask. And that’s why I started the coaching program.

Coaching is free for our USTaxAid year-round clients. I WANT my clients to be armed with the latest up-to-date strategies so we have better conversations about how to help them. It may spark an idea in something you’re thinking about doing and with that info, you’ll know what some of the things are we should discuss first.

In July and August, I focused on C Corporation basics and the Trump Tax Plan new strategies for C Corporations. If you join coaching right now (before 11/6/19) you can get those two coaching classes. They are only available for 3 months after they air, though, so as a new Home Study Course is added, an old one falls off.

Make sure you keep your copy before they are gone! (They will be available for sale on the shopping page, but it is much more affordable to join coaching and get 3 months’ worth for just one low monthly price.) You can join coaching at: https://www.ustaxaid.com/coaching-program/

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