AboutJohn Stancil, CPA Expertise I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a part time tax practice for over 30 years. I am a member of the AICPA, National Association of Tax Professionals, and the Institute of Management Accountants.
Visit my website at www.johnstancilcpa.com.
Also visit my blog, www.thetaxdocspot.com.
Experience I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CFM, and CIA. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I write a monthly tax column for the local newspaper. I have prepared taxes for over 30 years.
Education/Credentials DBA University of Memphis
MBA University of Georgia
BS in Accounting Mars Hill College
I am planning on opening a business next summer with some of my friends. We would create a LLP, S corp.
I have two questions,
1. If we run it ourselves and work for free do we have to pay workers comp etc? Also if we do member distributions as a form of self-payment, is it treated as an expense or will we have to pay the corporate level as well as personal captial gain tax?
2. My other question is if we take all of our proceeds and set up a scholarship charity fund and therefore have no net income, since we are students we would make ourselves eligibile. Is that legal?
Answer Aaron,
Thanks for your question.
1. Not sure what you are including in the etc. part, but since you are electing taxation as an S-Corp you will need to pay yourselves salaries if you work in the company. This would subject you to any state tax such as unemployment. Laws vary from state to state, so I could not give you a definitive list. The salary you pay yourselves is deductible for the business. You, of course, pay tax on your salary and your share of any additional profits earned.
2. Corporations are limited in the amount of charitable contributions they can deduct. So this will not work. Additionally, you cannot receive a tax deduction for something set up to pay yourselves tax free income.
