Should I take my small business into the corporate level?

Question

I have a Sole Proprietorship currently and have been urged to change it to a C Corp. I was told that the tax deductions would be better. I've been in business for 5 years and am starting to make a profit. Which is good for my pocketbook, but isn't so good for my tax liability. I also have a full time job where my employer provides insurance for myself and my family. If I Incorporate I would quit my full time job and work as a subcontractor thus making myself responsible for everything. I would also then have to have a partner/employee. I am eager to grow my business and am concerned if this is the correct next step. Any advice will be accepted.

Answer 1

Incorporation could provide tax benefits (I'd also look at an S-Corp).  It comes at a price, though: you'll have legal fees, corporate filings, accounting fees, payroll, quarterly payroll reports, annual payroll reports, corporate tax return, unemployment, etc., etc.

I'd also take a look at what it would cost to replace your family's health insurance.

Estimate how soon the extra work/profit from your business and any tax benefits would cover the extra expenses.

I'd suggest contacting your local small business association and/or a good accountant.  I'm not saying don't do it - I like seeing small businesses succeed.  But you should do thorough homework before you dive in.

Good luck!

Answer 2

Get yourself a C P A or an accountant who can advise you.  I can not believe you have been in business that long and do not have an accountant or a Tax attorney.. Or even someone like me a Business Consultant.  We can all save you money which in the long run will make you money... By the way if it took you five years to start making money you need to learn a lot more than you now know!!!!

Answer 3

Lawyers answer questions, but not on Yahoo