C Corporations Will Be the Wave of the Future


This post is in: Business
6 Comments

11-02-12

Your tax plan is going to go through a big change in 2013. It doesn’t matter who wins the election, there are already economic trends in play that will be making changes that will take decades to change. That is if anyone even wants to try.

Meanwhile, there are a couple of things that we know are true.

  1. If you want different results, you’re going to have to do something different. The average American is going to experience: lost jobs, no retirement funds, skyrocketing prices and increased taxes. If you know that you and your family deserve something better, you’re going to have to do something better.
  2. You’re going to have to up your game because half-way efforts don’t work anymore. It used to be you could just ride the trend and get ahead. Face it, that’s how most of us got ahead when the real estate market was taking off. Those days are gone. You have to learn more,

Those two rules are true for anyone with businesses or investments or just generally wants something different then the trend. These same rules apply for tax savings.

For years, the C Corporation has been the entity that the rich use. And it’s going to be especially true in 2013.

That’s because there is one dirty little secret that people aren’t talking about: ALL of the tax changes are occurring for individuals. C Corporations might have a tax change too. Their tax rate is likely to go DOWN.

So, now the question for every business owner is:

Do you want to pay more tax?

Or, do you want to do something different and pay less tax?

A C Corporation may very well be your own 2013 tax answer.



6 Comments

  1. John says:

    Thanks Megan!! I am going to see if I can create a new S Corp next year and start from scratch and close the C Corp.

  2. Megan Hughes says:

    Hi John,

    Thanks for your comment. The problem with moving from a C Corp to an S Corp is that you can get an unexpected tax hit when you make the switch. It doesn’t happen when you go from S to C, which is why we usually suggest that you start with an S Corp election.

    Whether or not it makes sense to lower your salary and take some money out as a dividend would depend on your income and personal tax bracket. It’s probably a good conversation to have with your CPA or tax advisor and crunch some numbers.

  3. John says:

    I currently setup my company as a C-corp but I realized that I end up taking all of the corp’s income as my salary for my personal monthly expenses. Is a C-Corp still valid for my scenario? or should I convert it to a S-Corp?

  4. Julie says:

    Hi Diane,
    I’m wondering on the C Corp – dividends are expected to lose their capital gains tax rate status – to be taxed at ordinary income rates. That’s pretty high double taxation.

    How do we get our money out of the C Corp then? (Other than higher wages).

    Thanks –

  5. Diane Kennedy says:

    The S Corp is a flow through entity, which means the income flows through to the individual income tax level.

    As we see income tax rates rise, tax deductions phase out, AMT and other tax changes at the individual level, the C Corp becomes more attractive. It’s just a question of math. The rates are lower.

    But there are some drawbacks and things to watch out for: personal service corporation, personal holding company, etc.

    Take a look at the 60 min webinar at http://www.CCorporationTax.com . There is more information there on why and when a C Corp makes sense.

  6. Sandy says:

    Why isn’t having an S Corp better than a C corp?

Leave a Comment