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Who Runs Their Business As A Corp?

 
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Old 02-01-2018, 07:07 PM   #1
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Who Runs Their Business As A Corp?


I just got my Corporation Kit from the state of CA for our company. We decided to form an S-Corp. I'll be headed to the bank to open an account soon. I still am very confused about running and maintaining an S-corp and looking for some guidance. Does anyone from CA operate as a corp and run payroll etc? This will be our first yr and the only people who I will need to do payroll for is myself and my partner. For example, what if we barely make any money? Are we still supposed to have a payroll? Any advice would be great. Of course I am still seeking help from my accountant.

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Old 02-04-2018, 02:21 AM   #2
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Re: Who Runs Their Business As A Corp?


We are operating in California as a Delaware LLC. We chose to go the LLC route in order to simplify the process of adding new partners to the company, gain some flexibility in how we manage the company and alleviate some of the administration, like holding annual meetings. We still use a registered agent service to help with making sure we file things on time. The LLC has no bearing on our tax status, and things such as payroll.

As a side note, not too long ago it was not possible for an LLC to get a contractor's license in California, which is why I think there are some many contractors who are incorporated. As an LLC we have some special compliance costs in CA, such as the LLC tax, as well as some extra requirements from the CSLB. We have posted a $100,000 Worker/Employee wage payment bond which a S-Corp is not required to post.

We had the help of a good lawyer to navigate us through this process. (Also, I am not a lawyer, and what I am writing here is just my opinion and not legal advice). The decision to go with the LLC over the S-Corp was the result of looking a a number of issues, including limiting our personal liability in the business, admitting new partners to the business, voting and managerial control over the company, tax issues, compliance costs, and a number of other minor issues.

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Old 02-04-2018, 08:34 AM   #3
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Re: Who Runs Their Business As A Corp?


I'll going S corp this year, lots of perks compared to Sole Prop. I've run S corp in the past and found it very advantageous..and not hard to set up all. IMO, you dont need a lawyer if you sit down and do some homework. Seperating your personal stuff from the biz is crucial.

There's a few very good books on LEGAL deductions when incorporated. You'd be surprised... and a lot of it, your accountant doesn't know or doesnt tell you.
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Old 02-04-2018, 08:45 AM   #4
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Re: Who Runs Their Business As A Corp?


My business is an S corporation in Illinois. My accountant did and does all the work regarding the tax stuff and my dad does the payroll himself. Once you learn it itís not that bad. And of course you can pay yourself as much or as little as you can afford.

This provides maximum protection against my personal assets Incase of a lawsuit

Something else you might want to think about is the new tax law that just passed has even more benefits to corporations regarding tax liabilities


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Last edited by Windycity; 02-04-2018 at 08:52 AM.
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Old 02-11-2018, 10:48 AM   #5
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Re: Who Runs Their Business As A Corp?


This post is about my lawsuits, corporations and how I changed the structure of my company to protect my personal assets.

As stated in several posts, I laid off 12 employees in 2016 and the laid off employees filed 14 worker comp lawsuits plus 1 civil lawsuit for overtime, 1-hour breaks, discrimination and many more things.

I have to consider that I am very lucky because my worker comp insurance company handled all the worker comp cases. I was audited by my worker comp insurance company and was sent a bogus bill for additional charges and penalties for $132,000. I was surprises about how my own insurance company was trying to rip me off because the company had some clown from the Philippines sending me emails with demands for the $132,000 and some U.S. companies were asking me to pay 25% of the money for good faith. I am happy I did not pay one penny because after I sent the insurance company more copies of my records I received a revised bill for $21,000. The way my own insurance company tried to scam me was bizaar.

Then, my civil lawsuit was for more than $1 million. This past Friday, I receive a telephone call from my attorney and she said the plaintiff is willing to settle for $35,000. I was planning on spending $80,000 to $120,000 to defend the case and if this case went to court the plaintiff would not get one penny. But, the entire legal system is really screwed up and money had to be paid to a plaintiff to settle a case even when the plaintiff is 100% wrong. That is because the plaintiff's attorney knows that it will cost many times more than $35,000 to proceed with depositions, mediation, etc.

I learned a lot of good lessons from my lawsuits. My company makes a lot of money and I own a lot of real estate. So, I am a big fat target for lawsuits. So, what I learned is a lot of things about corporations, why you don't want to commingle money between personal and business checking accounts and I learned how to protect my assets so that the next time I get sued the plaintiff will not get one penny.

It seems like everyone tells you that your personal assets are protected if your business is incorporated. During the past several months, I spoke with three attorneys regarding LLC, S and C Corporations. Every attorney told me that the worst corporation for protection is the LLC. I can't remember the reasons, but even my CPA told me that LLC's have a lot of problems.

For C and S corporations, there is only limited protection for personal assets and there is zero protection for assets if the plaintiff can prove that you paid him (or her) one penny from an account that is not 100% legally tied to the corporation. That is; if you paid the employee one penny from your personal checking account, or if you had a business checking account that did not have the same tax ID number as your corporation then you are commingling money and your personal assets are not protected by your corporation. If you pay an employee with cash that comes from a personal account then you can be held personally responsible for a judgement.

Thirty years ago, I had a small lawsuit and I thought I was not personally responsible for the judgment, but the judge said that the president of the LLC and the corporation are the same and that I was personally responsible for the debt. It was a small amount for about $800 and I paid it, but my attorney and CPA told me that the judge was wrong. Who wants to argue?

So, this is what I learned and this is how I changed my company so that I will not be responsible to pay out one penny for the next lawsuit. I cancelled the worker comp insurance for my company and I terminated every employee who worked for my company. My ex-wife had a contractor's license that was inactive since 1991. My ex-wife has zero assets with the exception of a house she owns and a few thousand dollars in the bank. My ex-wife went through all the legal processes for hiring all my employees and I have absolutely no ties to her business. If she gets sued by an employee then the plaintiff will not be able to find any assets. My ex-wife can dissolve her corporation at any time during a lawsuit and if there is a judgement against her she can file bankruptcy and no judge will every take away a person's personal home for a judgement.

A corporation can only protect you when you don't pierce the corporate veil by commingling money. Before you ask people on the street corners which type of corporation is better you had better ask a few different attorneys.

Personally, I am a book keeping fool when it comes to keeping accurate and complete records. My attorney was impressed when I gave her my records because I had every time card signed by my employee. Every time card stated the days the employee worked, the number of hours each day, the job addresses and the amounts paid matches my company's checking account to the penny. I had a color chart that showed the days the employee worked less than 6 hours, the days he worked more than 6 hours and the days he did not work at all. The only reason the plaintiff's attorney is agreeable to settling for $35,000 is because my paperwork is flawless.

My experiences tell me that we live in a world where safety is one of the least important things on our agenda. I find that when trying to sell people earthquake valves the people have absolutely no interest in safety and the only time earthquake valves become a priority is just after an earthquake.

I find that most business owners are so wrapped up in running their businesses to make a profit they don't make the necessary steps to protect their assets a priority until after they have an accident, or not until after they get sued. Then, I've seen hundreds of business owners go crazy when they get sued and they scramble to protect their assets, but that is like locking the barn door after the horses ran away.

The last thing I want to mention is that most business owners get small limited bits of advice about corporations from their attorneys and accountants, but when push comes to shove they find that the corporations do not have the protections they thought they would have and the business owners find that their advisers did not tell them the reasons their corporation will not protect them. It is not so simple that you just incorporate your business and you are protected.

I can't say that I am happy that my company has been sued so many times, but it many ways the lawsuits have taught me things I will use to protect my business so I won't have to worry about losing everything that took me a lifetime to earn. It is strange how it is so difficult to learn how to protect ourselves before we get sued and after we get sued is the only time we start to learn and things come into focus.

Last edited by daffysplumbing; 02-11-2018 at 11:05 AM.
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Old 02-11-2018, 11:14 AM   #6
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Re: Who Runs Their Business As A Corp?


I agree with daffy in that most people simply think that their business is incorporated so they think they are safe when most contractors have their trucks and tons of other assets in their personal name instead of being property of the corporation.

You have to make yourself an employee of the corporation that has no personal financial ties to the business


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Old 02-11-2018, 12:28 PM   #7
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Re: Who Runs Their Business As A Corp?


Daffy, any chance you're that "marry a plumber" guy?
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Old 02-11-2018, 01:37 PM   #8
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Re: Who Runs Their Business As A Corp?


Sorry you got raked over the coals barenaked, Daffy.

I know some guys who have several business names and keep them smaller and seperate. Not sure if it helps avoid the probs you encountered, but man that sucks. Scamming bast-ards.
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Old 02-12-2018, 03:06 PM   #9
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Re: Who Runs Their Business As A Corp?


Also note that if you are Corp/LLC, the more aggressive plaintiff layer will name both the Corp and the individual officer(s) in the lawsuit. That way, of the Corp legally distinguishes itself from the action of the officer, the plaintiff could still get something. So, as an officer, it's good to have additional liability insurance to cover your personal assets.

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