Tax Guru – Ker$tetter Letter

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    February 2009
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Setting Up Corp

Posted by taxguru on February 14, 2009


Subject:  C or S corporation, no employees/partners

I am not sure if you reply to emails asking for additional advice, but I’ll give it a shot.
I am starting a marketing company in Ca. with no employees. (new babies, need money)
I do have a full time job, and this will be on the side.
>From your article a C corporation makes more sense for me.
But, I am scared of ticked off tigers, cobras, AK-47s, and the IRS.
Will I be asking for trouble if my company makes no money, and I decide to end the corporation in a year or so?
Does my separate tax return get red-tagged if I start a corporation that does/does not make money?
Thank you in advance for your time.



You really need to be working with an experienced professional tax advisor to set up the best strategy for your unique situation.

A corp that only has losses doesn’t really attract a lot of dangerous attention from IRS; so that really isn’t a concern here.  However, there are some other more important issues that you need to evaluate.

For example, I am wondering why you are so anxious to jump into the cost and hassle of setting up a corp right now.  Most small businesses start off as Schedule C sole proprietorships and then evolve into a corp entity as they become more profitable.

Sole proprietorships cost nothing to set up or dissolve; unlike corps in Calif, which have a $800 minimum annual tax.  Losses from Schedule C can also be used to offset other income on your 1040. While losses from S corps can be used to offset other 1040 income, C corp losses can’t do that.

Please consult with a tax pro before you take that expensive leap into a corp.

Good luck.

Kerry Kerstetter



Thank you so much for taking the time to answer my email Mr. Kerstetter, especially in these holiday times. I have taken your advice, and will be seeing a tax pro. ASAP to seek some advice in these matters.




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