Q:

Subject: S-corp vs C-corp question

Dear Kerry,

First of all, thank you very much for all your postings on the Web. I recently came across your writings and found them very helpful and much more concise than I was able to get from anyone else.

My question is, I’ve incorporated this year (2006) in CA and my accountant at the time suggested that I should apply for S-corp status. So we did file Form 2553 and got approved. However, after reading your pages, I’m now thinking a C-corp might actually be more beneficial for me, especially since I don’t intend to take all the money out of the corporation, but let it sit there and get invested in the corporate accounts.

I was wondering, since I have not yet filed any taxes yet, if I still have the option to go ahead and file as a C-corp when I file for the first time. If not, are there any other remedies?

Thanks very much,

A:

Now that you have been approved by IRS as an S corp, they will be expecting an 1120S, so that is what you must file.  You committed to that status by sending in the 2553 and can’t just ignore it because you have changed your mind.

You should work with an experienced professional tax advisor to see if it makes more sense to revoke the S election and switch back to a C corp or just start up a new C corp.  As I’ve mentioned several times, the downside to a conversion is that you will be stuck with a December 31 fiscal year-end. 

As I’ve also frequently mentioned, there are plenty of times when having both an S and a C corp make a lot of sense.  I have no way of telling if that is the case for you.  Only a thorough interview with an experienced tax pro will determine if that is a better way for you to deal with your current situation.   The downside to having two California corps would be the hassle and expense of filing two tax returns each year, plus the $800 minimum annual tax for each corp.

Another topic that you should discuss with your personal professional tax advisor is whether any of your business operations can be set up in another state, such as Nevada, in order to avoid the high taxes in the PRC.  This is a tricky issue, but an experienced tax advisor should be able to see if that is a realistic possibility for your unique circumstances.

Good luck.  I hope this helps.

Kerry Kerstetter

Follow-Up:

I appreciate your help and quick reply.

Best

Q:

Subject: purchase

It looks like the basic (simple start) Quickbooks no longer imports Quicken data at all? Must use a Pro version or above? Is this correct?

Any suggestions?

Thanks

A:

As I wrote previously, the QB Simple Start program is a crippled version of QB and is to be avoided.

As I also wrote earlier, starting with the 2006 program, the Basic version has been dropped, so Pro is the lowest price version you can buy.

Depending on which version of Quicken you are converting from, you might be able to get by with an inexpensive version of QB from before 2006, which are widely available on eBay. The QB program has to be equal or newer than the version of Quicken the data is from.  For example, if you are using Quicken 2004, its data can be imported into QB 2004, 2005 or 2006.  If you are using Quicken 2006, you will have to have QB 2006.

Good luck.  I hope this helps.

Kerry Kerstetter

Follow-Up:

Thank you very much for your response!!

I did make it work with an old version of QuickBooks.

The free section of the WSJ has an interesting survey on how members of the public view various professions in terms of prestige.

Those with the highest number of people putting them in the Very High Prestige column are not surprising: Firefighter (63%), Doctor (58%), Nurse (55%).

What is surprising from a selfish perspective is how low we Accountants are viewed, with just 17% placing us in the Very Great Prestige column.  To add even more insult, this is lower than Lawyers (21%) and Congress Critters (28%).  At least we’re higher than a few other professions, such as Stockbroker (11%), Realtor (6%).

According to the chart below the main survey results, we have been at around this level for well over 20 years. 

I wonder if this kind of attitude will further discourage young people from entering our profession.