Tax Guru – Ker$tetter Letter

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Archive for March 8th, 2007

More C or S Confusion

Posted by taxguru on March 8, 2007


Subject: Got a few questions…
Hey Tax Guru,
I am a business owner, that likes to have and understanding of all that goes on within my business.  I’m not the kind of owner who is willing to just do something because of the advice that someone’s gives me…I really want to understand the reasons why.  I’m not sure my accountant likes that, I think that he would rather just lean on him, and be dependant on him to make those decisions…which I resist, because I want to understand and be responsible for the decisions that effect my business .
Anyway, I have been a dba for the last 7 years, and have recently formed “C” business structure.  Now I’m in unchartered waters because I don’t know how I can best take advantage of this structure to directly benefit me and my immediate family.
I have a friend who has a company that does the same, and he is receiving conflicting advice from his lawyers and his Accountant as to whether he should be “s” or “c”.  (He has formed it as “s” for now)
Anyway…Is there a book or someone who could advise us on what is the best structure to use?  So many conflicting voices, so many conflicting ideas…..just need some clarification!
If you got the time to advise where to turn…it would be very helpful.  Email or per phone…doesn’t matter to me.  
Thanks for the time.



There are far too many options to consider and possible scenarios that can be used to achieve your goals for me to even begin giving you specific advice via this medium.  While books can explain how various types of business entities function, no book is a substitute for the expertise of an experienced tax pro.

You will need to work directly with an experienced tax pro who can analyze your unique circumstances.  Such a tax pro should thoroughly explain the justifications for any decision that affects you, such as the use of a C or S corp.  If s/he can’t properly defend any such decision, that is a sign that you need to be working with someone else.  Similarly, any tax pro who reaches a conclusion as to the best entity for you without asking you dozens of very probing and personal questions should be avoided.  Such decisions must be custom tailored to the situation and not taken off the rack as a one size fits all solution.

While your friend obviously needs the same kind of assistance in straightening out his business plans, you should not base your business strategies on what may be proper for him.  While his business may be similar to yours, there are too many other factors that need to be considered which can’t possibly be exactly the same, such as family and other personal issues.

Jumping into a new corporation without knowing what you were getting yourself into was a very reckless and foolish thing to do.  However, if you get competent professional assistance ASAP, any damage should be minimal.

I wish I could help; but I already have too many clients to take care of properly; so we are still trimming back on the difficult clients and are not accepting any new ones at this time. 

Unfortunately, we don’t have anyone specific to whom we could refer you. I did recently post some names and links for some like-minded tax pros around the country.

If you haven’t already done so, you should check out my tips on how to select the right tax preparer for you. 

I wish I could be of more assistance; and I wish you the best of luck.  

Kerry Kerstetter





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