Considering Incorporating myself...

Reminds me of a med school joke that a doctor friend told me about.
MD= medical doctor
PHd= poor hungry doctor

 

DES - because I'm going to call you by your original DEScriptive name - I'll follow up with Dale's advice and say this to you: if you can't figure it out, get busy at something that might be it. In that, you can change it, and find what you love. If it's writing, dammit, become a great auto writer! If it's an artist, go for it.

A friend of mine in the D/FW area is just a graphic designer by day. And his free time over the years has been spent driving on tracks, autocrosses, but even more - on the sidelines. He's worked as a corner worker for many different races from amateur to professional karting. With this, he's built up a lot of contacts, knowledge, and of course, driving skills as well. He's incredibly fast, even though he is twice my weight and about a foot taller than I am. Anyways, what he has always loved to do is paint. And with this talent, he's painted many cars. Out in CA, he's been commissioned by private owners of exotics and rare cars. He's told me many stories, and one that sticks out is how he arrived at one person's 'manor' as he calls it, and out in front was an old Bentley, waiting for him. On the front seat was a note with the keys and told him to find a great spot. And so he drove around for 20 or 25 minutes until he found a spot to photograph the car from many different angles. Returned the car. Developed the pictures, and then painted away. And he gets paid for this! Oh, and btw, he's only about 30 years old. So, get started.

This isn't to tell you a wild story at all. He's just another one of the guys that comes down to Austin to visit with friends and I see him at an autocross event from time to time. It's just to say, he loves what he does, and he has great exposure with cars of all kinds. It's something to think about, something to toy around with and get the wheels cranking.

So... what's the plan DES?

 

An L.L.C is no big deal. It basically protects YOU from THE business. Like said above, if the business is sued or you as a business operator they cant take your diecast car collection or your pair of ragged shoes.
Or your riches if you're hiding them from us . However, I hear that there is ways for a nasty attorney to get around that and get into your personal stuff. Either way L.L.C is about $20 a year to keep going.
You generally file LLC under your own regular return w/ soc number. A INC involves shares and much more complicated return, quarterly payments and additional tax. But, with the ability of shares it allow investors and allows you to grow. No inverstor w/ LLC but I don't think your interested in that. Now as far as incoporating oneself to protect assets I am intersted in that. Not for deductions but for liability protection. Anyone doing that kind of stuff?? I have heard of umbrella policies but not too familiar with them
thanks

For the record. You really are not a "business" without at the least a DBA. $10 at the courthouse. Qualifies you for legit business in government and public eyes but NO liability protection. There is also liability insurance. If people would just stop ****ing suing all the damb time things wouldn't have to be this complicated. I miss the old days

 

There is a very special key on your keyboard. It occupies the space right above the shift key on the left hand side of the keyboard. If you press it, your text will no longer look like you are SHOUTING AT THE TOP OF YOUR LUNGS. It is called the shift Lock key. Yse it.

This public service message brought to you by the friends of quiet talking.

<<Donning flame protecting suit>>

 

DES,

As far as setting yourself up as a corp to deduct all your living expenses,it will not work. The IRS will come down on you pretty hard. Think about it, if it worked, everybody would have Inc. attatched to his name!

Probably a better idea (assuming you are doing this to avoid some taxes) is to set up an International Business Corporation offshore. Then, if your boss agrees, work as an employee of the IBC. Your IBC would bill your current employer and they would send the money off shore. Your boss would save on SS and payroll taxes. The IBC would than "lend" you money and send it back to you in NY.

But, I should talk to you about the complexities of the plan before you try this at home

Bob

 

Don't even think about it without a business on the side. Of course your employer would love it. He pays you as an Independent Contractor and you have to cover all of your federal insurance (SS, Medicare) and deal with taxes and your states workers comp. insurance. A good deal for him. DON'T DO IT.

An S corp is a fine idea for a business even if you do not make a ton of money. The main benefit is that you pay yourself a salary of 36K and then take whatever other profits in the form of dividends. This way you escape SS tax payments on your income to ~75 or ~79K whatever it is this year. So there is a big savings if you make that kind of money. The one thing is that you have to follow the formalities and if you don't you may lose any protection a Corp. will give you. The easier thing to do is to start an LLC. Same protections but no savings on SS tax, and less formalities on running the LLC.

Hope this helps.

 

Carbon,

Based on what has been stated thus far, this sounds like a great idea for your employer and a very bad idea for you.

Regardless of the self-employment configuration (Sole Proprietor/DBA, C-Corp, S-Corp, LLC), you would be required to pay double your current SS & Medicare withholdings (15.3% of the first $87,900 and 2.9% to infinity). Your 7.65%, currently withheld, is matched by your employer and I’m sure he would love to shift this burden to you; not to mention, health insurance coverage that is hugely expensive these days.

Corporations do provide insulation against personal liability but require additional mandatory costs, in most states, such as Workman’s Compensation Insurance, Unemployment Insurance, and corporation filing fees ($476/yr. in Mass.). You would also need general liability insurance coverage and plan on more complex state and federal tax filings that need to be done quarterly and yearly.

Trying to circumvent SS/Medicare taxes through the use of a S-Corp setup, as recommended in the previous post, is almost sure to invite an IRS audit. If the maximum SS limit has been satisfied (withholdings to $87,900), then a small amount of profit will be allowed as dividends, thus bypassing the 2.9% Medicare requirement.

 

Listen to guy and Crusing. They speaka da truth...

DrTax

 

Carbee....Call me in the AM about this idea. I'll be in my office, chained to my desk.

 

DES,

I've enjoyed reading and replying to your posts over the past several months, especially over the Christmas season.

Listen to what DrTax said it's good advice. If you would put the same amount of effort into your current occupation instead of trying to beat the system you would be suprised at the rewards. The insurance business is a rewarding career. If you like people and are truly interested in their needs they will reward you with $$$.
Sometimes big $$$.

Set your goals for 5 years not 5 weeks. You have a gift for words use them to further your career. When I started my insurance business I set a goal of $50k in 5 years. Guess what? I hit it. Now 26 years later I work part time and enjoy life. I now have the time to enjoy the 2000 360 coupe I just bought today.

Don't look for a way out. Look for a way to get in and get going.
You have the ability you prove that in your posts.

Wishing you the best,
Dave

P.S. I really did buy the 360 today.

 

Just reading the replies again in more detail. Hell, when I was in my early 20's, I had sqwat for money and 'things'. What I did have was tanacity. I was good in sales. I always knew that I would prosper. When I was young, my baby face overshadowed my talent. I had to wait for it to catch up.

I suggest to all younger people to either: 1) Get a good education or 2) get into a trade. If one does what they love, the money will follow (BTW, that is a title of a great book). I lean more towards #2 because one has more mobility in life (IMO).

Dr. Tax: Your comments to DES were decent ones. Between the lines though, I feel you were busting his chops a bit harder than you needed to. I feel its better to encourage people than to bust their balls. If you treat people for what they are, they will always be that way. I feel that you may think DES is a loser...But if you treat people for what they can be, they will become that.

 

SRT-10:

What invites an audit is not the S-Corp set up with a salary of 36K. It is when you take less of a salary. Been doing it for several years... no audit. My father has been for over 30... no audit.

It always pays to have a good accountant!

 

Peter, I don't think anyone is a loser. I gave up making judgment calls like that a long time ago when becoming a parent taught me a few things about humility. All I was trying to do was to give Carbon/Des a nudge in the right direction. I just felt that Carbon was wasting time by legally changing his name or thinking about incorporating when he is a wage slave. Carbonoi has passion, and he has talent. But based on my experience, that's not enough. You also must have discipline. As a friend of mine once said, there are a lot of people who are on the verge of becoming; but before they get there, they start becoming something else.

Just to give one example, I had a cousin who was one of the smartest persons that I ever knew. But he was always on the verge of becoming. Somehow he just never got there. Long story short, he drank himself to death. His son found him dead one day in his bed. He was 52.

I'm not saying that this is going to be Carbon's fate. What I am saying is that for someone in his mid-20s, this is the time of life to be spreading his wings. Fly Carbonoi Seagull, fly!

BTW, I have gotten more private messages about this than any other single thing that I have posted, and all of them have been positive for Carbon. So Carbon, if you are listening, you are loved by many.

DrTax

 

An S-corp is a way of incorporating where the incorporated company does not expect to build a big bankroll. Hense, the IRS expects almost all of the profits to flow out and on to the S-corp owners, where it is taxed as income.

You need to be aware of the other taxes any current employer may be picking up on your behalf (self-employment tax, rail road tax, health insurance,...) that they get at reduced rates, that you, as an S-corp, will not.

While you can become able to excersize write offs and write downs as an S-corp, you will need income in the $200,000K-$300,000K range before the write offs/write downs are big enough to be worth the cost, time and paperwork. {{Unless you are a lawyer already}}.

 

I spent ten minutes on the phone with Carbee last night. I gave him an business idea that he really went off on. I am sure that by ow, he has done eight+ hours of homework on the topic.

I like spending time with people like him that at least listen and have the gumption to think about good advice to figure out a direction in life....My guess, he'll be on this board in two or three years showing ua all pictures of his new Ferrari. Again, treat people for what they are and they will stay that way. Treat people for what they can become, and they will get there.

 

Great Peter, you're a good man. Carbon better put in his order for a F-70 to make sure that he has a spot in line!

 

Hell...I don't have a day of college. I watched all my friends spend 4-6 years in college. Out of all of them (I keep in touch with about 25 of them), only two have higher incomes than myself.

It was just last night that I was telling Melodie that 15 years ago, I had a job in electronic distribution that I flat out failed at. I had one white dress shirt and could not afford a second one. I came home every day before my roomate did and washed my one shirt and ironed it for the next day. It was about that time in my life that I decide to get out of electronic distribution and look for a job at a rep firm in electronics. I knew that that would be my 'sweet spot'. It was.

I excelled in that position for 14 years. It was fun from time to time buying lunch for EVERYONE that in the recent past told me I would not amount to much in the sales world. The best lunch I did was with my old 'boss from hell', a real ****** at my prior job, the King of pricks. I told him I would pick him up. In walking to the parking lot, approaching a 4-door Cutlass Supreme that he thought I was driving, I tossed him the keys to my new 308QV and said 'You drive'.....As he started to grin, I looked at him and said 'Don't laugh....It's paid for'.