Requirements for Operating a Sub S Corp in VA

[esssoteric]

I'm curious as to what owning a Sub S entails. It is my understanding that the business can file either quarterly or yearly, and its earnings are not taxable, as tax is paiod by the employee of the business who does not have to pay themselves a regular salary. What are the requirements for a Sub S having employees...is it mandatory that they have employees, how many months can the Sub S wait before establishing an employee? How often must that employee pay social security, etc? Any direction is appreciated.

 

[olgethorpe]

Too many questions...

You've got way to many questions to answer in an on line forum. Go buy "The Legal Guide for Starting & Running a Small Business" from NOLO Press. It will give you some guidance...and show you there's a lot more you need to know.

Depending on what state you live in (Ohio for example) you might find a "Guide to starting a business" section on your state's web site that can also get you pointed in the right direction.

 

[esssoteric]

OK...thanks, but that wasn't very helpful. If I wanted a book recommendation I'd be on Amazon. If anyone can guide me with general answers, i'd much appreciate it.

 

[mikaela_renee]

Online Resources should help you...

Hi,

There is a section within the Virginia State Government website with information which might assist you in getting the answers you need...or at least providing you with the contact information for appropriate departments...tax info, starting a business, etc.

Here's the link: http://www.virginia.gov/cmsportal/employment_850/starting_981/index.html

Good luck,
Mik

 

[bisto]

OK...thanks, but that wasn't very helpful. If I wanted a book recommendation I'd be on Amazon. If anyone can guide me with general answers, i'd much appreciate it.

DON'T BE UNGRATEFUL. WITH AN ATTITUDE LIKE THAT YOU WILL NEVER SUCCEED IN BUSINESS. READ THE LAST LINE OF YOUR INITIAL THREAD. " ANY DIRECTION WOULD BE APPRECIATED"
YOU WERE GIVEN A DIRECTION - THE LIBRARY. NOW STOP BEING CHEAP AND GO AND BUY YOURSELF A BOOK.

 

[chrissie]

Hi essoteric,

I'll try to give you a hand here. S-corps are "pass-thru" entities for tax purposes, meaning that income/loss of the business is passed thru to the shareholders, who report it on their individual tax returns come April 15.

When it comes to employees, these are murky waters. Some will argue that the owner can just pay himself dividends out of the company, thereby avoiding payroll/self-employment taxes. I can tell you from a practical standpoint that the IRS frowns upon this and will aggressively go after someone who pays themself little or no salary and draws dividends, often re-classifying dividends as salary and then backcharging for employment tax, penalties, etc.

Payroll taxes (social security) are pay-as-you-go taxes, so you need to be sure you have that cash flow to cover your tax liabilities along the way. If you are unsure about this or would rather have a simplified way of operating the business while having pass-thru taxation, you may want to consider an LLC. An LLC gives you the same limited liability protection as an S-corp, while the income is passed thru. The first year you can pay your self-employment tax at April 15. If in any year, you end up owing tax on the LLC's earnings, you will be required to pay "estimated quarterly tax" every year thereafter.

Here's an article that discusses the pros and cons of S-corps vs. LLCs which you may find helpful:

http://www.mynewventure.com./?show=S_Corp_vs_LLC