[ajug-members] Disadvantages of Delaware corp?: consultant incorporation tips / resources?
bemowski at yahoo.com
Wed Nov 9 08:48:09 EST 2005
I created a delaware corp because I'm a lemming. I was in a hurry, everyone at the
time said Delaware was the thing to do, so I did it. Yours is a very well
considered approach. I hopped on hotbot.com a little over 5 years ago (before I
used Google even) and looked for online services to form a corporation. The sum
total of my reasearch into the matter could be measured in hours. I didn't know
back then that I'd still be working for that company today.
In hindsight, perhaps it wasn't the best decision, but I've made much worse
decisions. As I said, the only recurring cost is 200/yr for registered agent, and
I think 60 for franchise tax. If you can save 260/yr by incorporating in GA,
instead of DE, why not.
The things I think you're looking for in a corp are:
1) Limit liability (protect yourself)
2) Save tax (put more money in your pocket)
These come at the expesnse of increased paperwork and accounting. You may minimize
some of your paperwork by incorporating locally.
--- Curt Smith <chsmith at speakeasy.net> wrote:
> 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
> > 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,
> > licensed to operate within the city of Atlanta. I don't want to get into a holy
> > over GA Corp vs. Delaware Corp. The tradeoff is you have to pay about 200/year
> > DE registered agent + about 60/year in franchise tax, but your corp will pay no
> > 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
> > you some FICA tax (tradeoffs there as well). I think last year you could
> > 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
> > 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
> > 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.
> > you were in the business of auto-body repair - zoning would likely prevent you
> > 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
> > 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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> Curt Smith
> csmith at javadepot.com
> (h) 404-294-6686
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