S-Corp Question

Wensdy

my business is an S-corp, just got started and looking for answers.
do you get penalized for certain things if you are an S-corp? like if I wanted to take money out of my business each month to give to my mother in Colorado, would that cause a penalty? also, if my wife withdraws money from the business account, would that cause penalties?
anyone have a website to review guidelines for S-corp?
just new to all this business-related stuff.
thanks.

PressurePros

As long as you can categorize all deuctions as legitimate expense. Be careful about payments to individuals or you are gonna get nailed for payroll taxes. Everything with an S-corp should be run through an accountant. There are a ton of things that can get you in trouble down the line.

__________________
Ken Fenner
Pressure Washing PA
Roof Cleaning Services PA

PipeGuy

Rule of thumb - if it's not "business-like" it can get you in trouble. Supporting your mom and providing pocket money for your spouse is definitely a no-no; even if your just using your business cash as a personal line-of-credit. Those kind of activities need to be funded after payroll taxes if you want to steer clear of tax headaches.

__________________
Fortunately I keep my feathers numbered for...for just such an emergency. -Foghorn Leghorn

Mike Finley

You can take all the money you want out of your bank account. If it's a business deduction it will lower your net profits and taxes, if it's money to pay your mom's rent it will be considered a cash disbursement to you.

Example 1

10,000 sales
-1000 cash you took out and bought some tools
----------
$9,000 taxable income

Example 2

10,000 sales
-1000 cash you took out to pay your mom's rent
---------
$10,000 taxable income

What you are asking isn't a question about s-corps, it's just a basic accounting question, it would be relevent in any type of business entity.

The money in your bank account is not the money you can spend, remember that. The money you can spend is your after tax income.

CHIAML

Great explanation Mike!

Wensdy

how can I get information on legalities for an S-Corp?

thom

When you ask about legalities for S corps you're asking the wrong question, kinda like asking "how do I sweat a joint in pex?"

By definition, any Corp (C or S) is a separate entity. You must maintain its separate identity or you may lose its protections. For example, someone could come after you personally for corporate liabilities because you didn't treat the Corp as a separate entity.

Your paperwork must be kept separate. If you write checks for non-buisiness expenses, your books must clearly show the amounts as disbursements to you, or to other stockholders. Payments to stockholders (maybe your mother is one) must be consistent with the amount of stock they own, and each gets a K-1 every January showing the amount earned by the Corp based on their percentage of total ownership.

The shareholders will pay taxes on the earnings of the Corp regardless of distribitution. If you overdistribute to some shareholders and underdistribute to others you could set yourself up for having your corporate status removed. If this is what you want to do, you should look at an LLC.

With any corporation, you must treat it as a separate and completely fact based entity. No cheating, everything is by the book and based on ownership percentages.

tgeb

This link has some info.

http://www.irs.gov/businesses/small/...=98263,00.html

Not sure what all you need to know, or are asking but...

How did you become an S-corp if you have no knowledge of what is required?

I am not picking on you, just curious is all.

__________________
Tom

www.gebcon.com

Wensdy

I'm just beginning to learn about running a business.
my accountant does my taxes, and on the tax forms it shows me as an S-Corp. I am not knowledgable about the do's and don'ts, etc. But I want to do the right things.

when I write a check to a subcontractor for a loan like $1,000.00 that will be paid back by the subcontractor, I categorized the account as either a draw or loan - is this correct to do in Quickbooks?

like I said, I'm a beginner with running a business and every day I learn something new. nice to have this board to contact for questions/answers.
thanks again

Wensdy

I'm from Mexico and I just put my trust in my accountant to set things for me when I got started. maybe I am a bit neive, but all this is a learning experience.