New Corporate Owners Guide to Maximizing the Benefits of Your New Corporation:

Checklist for Maximizing the Benefits of Your New Corporation,

17 Tips for Increased Deductions and Reduced Audit/Lawsuit Risk.

• Make sure your corporation has its own checking account. Transfers to the corp. might look like taxable income to an auditor (or bookkeeper).  Limit transfers by procuring credit lines.

• Business Credit Cards are nifty because the balances are not usually reported on your personal return; however, for tax purposes, any credit card without personal expenses is a business card.  

• If all of the deposits are income, and all of the outflows are expenses, then your accounting will be much easier, and it is probably less likely that a lawsuit will “pierce the corporate veil.”

• Review every business checking and credit card statement; make sure that no one is stealing from you, and write notes about your purchases, especially purchases of assets.

• Keep a coupon wallet or empty tissue box in your car for receipts; use a “deduction” folder/label in your email for your business expenses.

• When spending profits, be sure to first transfer them to the personal bank account; consider taking profits in nice even blocks of $3,000; it will make things easier for your accountant.

• Since interest is a deductible business expense you will want to give priority to paying off personal credit lines.  This means it is more likely you will carry balances on your business accounts, so you might want to designate the cards with the lowest rate for business expenses.

• Hire a payroll company and pay yourself a salary; the IRS requires it. Don’t over-do it; wages are subject to FICA, and the rest of the profits you reap (dividends) are usually not subject to this double taxation.

• Have the payroll company reimburse you for your medical insurance premiums, business miles, and any business expenses that you accidentally pay with your personal accounts/cards.

• Have the corporation pay its fair share for rent, utilities, insurance, housekeeping, & security if it shares your home.  An audit might go easier if the checks are made out to 3rd parties: landlord, SCE, etc.  The corporation could also write reimbursement checks to you personally, try running these reimbursements through payroll.

• The max SEP IRA Contribution is now based on your W-2 earnings, not the company profit, so you will probably want to open a 401(k) plan which often allows an extra $18k (or $24k) of “elective deferrals.”  Either way, things can get complicated if you have employees.

• Submit a W-9 to each company/client that might issue you a 1099-MISC.  Check and make sure that they are not going to use your old EIN or SSN anymore for IRS reporting.

• Email us all IRS/FTB confirmations:       Federal EIN       EFTPS PIN       S-Corp Election      CA ID Number

• Mark Calendar: December: 401k, Payroll, Reimbursements  January: Payroll taxes, W2s, 1099s  March: Corp. Extension September: Final 1120(S) Tax Return.    SOS Statement of Information is due:__________________

Other Important Items:

• Get the oil changed every January by a professional and keep the invoice that shows the 3rd party verified odometer reading; keep a copy with the mileage log.

• Resist the urge to have the corporation own cars, real estate & other expensive assets; the stuff owned by the corporation might be at risk if the company gets sued, so there is usually a better way to hold title.  Also, paying taxes on phantom income for personal use of business assets can be complicated.

(If an officer-owner wants to drive a luxury vehicle then he might want the corporation to lease it for him in order to maximize the deductibility; ask for help understanding the phantom income for the personal use of this vehicle)