Ask Questions 
Share Tips 
List Your Business 
Coffee Talk with Experts 
Biz Planning | Sample Plans 
Idea 
Name 
$ 
Do It! 
Promotional Merchandise
Managing | Operations
Work @ Home 
Yoga @ Your Desk 
|
|
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
Featured Biz Question
I would like to open a teen resale shop offering name brands, such as Tommy. My sister and I are in the process of setting up our retail store. We became an S corp a few months ago -- as we were told this is the best way to go. I'm a little confused tho, on what we'll have to pay the state, what taxes are. There is so much talk about double-taxation savings, I don't really get it. When I went out to the IRS site, there are 30 different S corp forms. Which ones really pertain to us?? Also, we were told by our accountant that we don't need a fictitious name-however, at least 10 people have told us we DO. Why? and how do we go about this??? Thanks!
Michelle, The Teaching Store, Inc.
Answer from our Guest Expert Peter Hupalo of Hupalo Ltd.
S Corporation Taxes
First, congratulations on starting your new store! I wish you happiness and financial success! I've got a long answer for you, but I felt like I needed to get some of the basic business structure and tax scenarios out on the table before diving into the S corporation, double taxation, and fictitious name details. I think this beefy background might help you better understand your newly acquired S corp situation. So let's begin with sole proprietorships and work our way to S corporations.
A Quick Review of Sole Proprietorship Taxes
You've already gotten beyond the sole prop stage, but for those who haven't yet traveled that far, let's do a quick review of doing business as a sole proprietorship. Often, people start a business, and when tax time comes around, they learn they're "sole proprietors" by default. As such, you file Schedule C (or the easy version C-EZ) with your Form1040, Individual Income Tax Return to report your earnings (or losses) from operating a business. (IRS Publication 334 helps sole proprietors learn about taxes). Schedule C is just like any other attaching schedule to the1040. In the end, all of your hard work is summarized by one line on your 1040 tax return showing your net profit or loss from running a business, which is then taxed to you as ordinary income.
If your earnings are above $400, you also need to file Schedule SE (SE stands for self-employment). This is the point at which many new entrepreneurs get a queasy feeling and start thinking, "Hey, this sort of sucks. I'm going to be paying other taxes than just income tax on my earnings." As a business owner, you will learn about many, many taxes of which the average employee has little knowledge. Your self-employment tax is the equivalent of employee Social Security and Medicare Benefits tax, better known to employees as FICA (Federal Insurance Contributions Act).
The disadvantage of being a sole proprietor is that you and your business are considered the same legal entity. If someone falls in your retail store, for example, and wins a big judgment against your retail company, structured as a sole proprietorship, that judgment is also against you as an individual. All of your personal assets are at risk. To get liability protection, many savvy entrepreneurs incorporate their business. continued
Page 1 - 2 - 3 - 4 - 5 - 6
|
|
Small Business Tax Center • Idea Cafe Home • Sign Up • Biz Grant Center • CyberSchmooz •Coffee Talk with Experts • People in Biz Profiles • Starting Your Biz • Biz Planning • Running Your Biz • FREE Trade Publications • Marketing • Financing Your Biz • Human Resources • Legal & Biz Forms • Managing Your Biz • eCommerce • You and Your Biz • Gen X • Work@Home • The Fridge • De-Stress • Send an Award • Send an eGreeting • Yoga @ Your Desk • Web Guide • Idea Cafe in the News • About Idea Cafe • Advertise on Idea Cafe • Contact Us • Privacy Policy • Site Map • Small Biz News
Copyright 1995-2023, Idea Cafe Inc. Downloads are for personal use only, not for resale to others, and may not be reprinted in any form without written permission from Idea Cafe Inc. DISCLAIMER: We hope whatever you find on this site is helpful, but be cautioned that it may not apply to your own situation, or be totally current at any given time. Idea Cafe Inc. and all of its current and past experts, sponsors, advertisers, agents, contractors and advisors disclaim all warranties with regard to anything found anywhere on this family of websites, quoted from, or sent from Idea Cafe. and its related sites, publications and companies. We also take no responsibility for comments published by others on these pages. TRADEMARKS: The following are Registered Trademarks or Servicemarks of DevStart, Inc.: Idea Cafe®, Online Coffee Break®, The Small Business Gathering Place®, Take out Info®, Biz Bar & Grill®, Complaint-O-Meter®, A Fun Approach to Serious Business™, CyberSchmooz™, and BizCafe™.
|
|
|
|
About the Expert
Peter Hupalo
Owner of HCM Publishing, Inc.
Peter investigates the latest computer-programming technologies and researches
companies for investment. He also writes a column about entrepreneurship
and small business for iSyndicate.com and reviews biz books. Peter wrote
Thinking Like An Entrepreneur, about how to make savvy business
decisions and take real control of your financial destiny. more