[ajug-members] Disadvantages of Delaware corp?: consultant incorporation tips / resources?

[Curt Smith]

Thanks a lot Paul for the Delaware S corp tip and steps.  Any 
disadvantages of a Delaware?  Why aren't all professional corps Delaware?

I'll read about why there'd be a GA tax advantage but this is a mystery 
as to why it would benefit me if my W2 income from the corp has to pay 
GA/Fed tax at my personal rate...   This might take this discussion too 
far in this forum. 

Thanks, curt

Paul Bemowski wrote:
> Hey Curt.
>
> I've helped several people with this in the past, so rather than answer directly,
> I've cobbled some emails together.
>
> Some of what is below is relvant for all corporate forms, but it is specific to
> forming a Delaware S Corporation, licensed to operate as a foreign corp in GA, and
> licensed to operate within the city of Atlanta.  I don't want to get into a holy war
> over GA Corp vs. Delaware Corp.  The tradeoff is you have to pay about 200/year for
> DE registered agent + about 60/year in franchise tax, but your corp will pay no GA
> state tax.
>
> Regarding retirement accounts.  Once you form the corp, you should pay yourself as a
> W2 employee of your corp.  This is the only way to contribute to an SEP, and saves
> you some FICA tax (tradeoffs there as well).  I think last year you could contribute
> up to 25% of what you payed yourself via W2 to an SEP.  I run my SEP thru eTrade -
> but anyone will do it.  
>
> Regarding an accountant.  Find one.  I have mine do year end taxes, but I do my own
> quarterlies.  
>
> I didn't mention it below, but you should also register with the GA Dept of Labor if
> you make yourself a W2 employee of your corp.
>
> There's a lot to learn, best way is to jump in and do it.
>
> Bemo
>
> ===================
>
> For the inital incorporation I used:
> http://www.incorporate.com/
>
> Pretty good service.  Skip all the 'value added' crap with stock
> certificates, corporate records, etc.  I think in deleware you
> still need a company seal, but other than that you don't need
> it.  Should be 150-200.  
>
> Also consider what they charge for registered agent service,
> because you'll have to pay this every year.  
>
> Here are the basic steps:
> 1) Incorporate.  This means that some third party will file
> "Articles of Incorporation".  You have to choose a name, and
> directors and officers (you will be all of the directors and
> officers).
>
> 2) Apply for a tax id number (this is the social security number
> for your corp).  Use form SS-4 available from irs.gov.  You can
> do this on the phone with the IRS, instructions are on the form.
>
> 3) Register as a GA foreign corp.  I don't remember exactly how
> to do this, but info should be avilable here:
> http://www.sos.state.ga.us/corporations/
>
> 4) Register with the city for a business license.  You have to
> physically go to the court house on Trinity Ave. downtown to do
> this.
>
> 5) Take your business license, TIN (Tax ID number) and articles
> of incorporation (which make you President, CEO, CFO), to a
> bank.  With these documents you can open a corporate bank
> account.  In Atlanta, they will not let you open the bank
> account without an atlanta business license - or else I'd say
> skip that step.
>
> Now you're ready for business.  All this will likely take about
> 2 weeks.  I believe you have to do those steps in order.  
>
> Also, you probably want to be an 'S' corporation rather than a
> 'C' corporation.  S corp is the most common form for small
> business, and involves less paperwork.  Basically an S
> corporation pays no federal income tax, because at the end of
> the year, all income is taxed at your personal rate.  To be an S
> corp, you have to file IRS for 2553 sometime in the first few
> weeks of existence.  You can switch between S and C, but only at
> the boundary of fical years (which will be calendar years for
> you). 
>
> Read on the net about differences between S corp, C corp,
> partnership and LLC.  Most independet contractors go for S corp.
>
>
> ==========
> Some later info on registering as a foreign corp:
>   
>> It looks like this is the form I'll want to register as a foreign entity:
>>
>> http://www.sos.state.ga.us/acrobat/Corporations/236_2000.pdf
>>
>>     
>
> ==========
> Info on getting an Atlanta business license (relevant for any corporate form): 
>
> You may need a federal tax id number (TIN) which is the SSN of your 
> corporation.  
>
> The business license is for your company, not for you personally.  It does 2 things:
>
> 1) forces you to pay a small tax to the city annually.
> 2) enforces zoning laws.  When you get your business license, it is tied to a
> physical address in the city.  You are in the business of computer programming.  If
> you were in the business of auto-body repair - zoning would likely prevent you from
> using your apartment as the primary place of business.
>
> You have to go to the atlanta business license office at the courthouse on 
> trinity ave downtown to get this.  budget 1/2 day to get it done - because you have
> to go to the zoning office as well - which is in the same building.
>
>
> --- Curt Smith <chsmith at speakeasy.net> wrote:
>
>   
>> Off topic question but related to some on this list:
>>
>> I'm working as a consultant getting paid via W2 through my agency.  I'm
>> wanting to move to a corp-to-corp relationship where I manage my taxes etc
>> and also be able to take advantages that I can't under W2 like create my
>> own retirement account (SEPT/KEOG ??), deductions for professional
>> equipment like computers, education, travel etc).
>>
>> I'm looking for help and resources?  Local SIG's, books, websites etc?
>>
>> Your tips and issues you've run across.
>>
>> Maybe an off list discussion?
>>
>> Thanks, curt
>>
>> Curt Smith
>> csmith at javadepot.com
>> (w)404-897-3073
>> (h)404-294-6686
>>
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>>     
>
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-- 

Curt Smith
csmith at javadepot.com
(h) 404-294-6686