Book Helps S Corporation Owners Understand Taxes

The new book "How To Start And Run Your Own Corporation: S-Corporations For Small Business Owners" helps small business owners understand the taxation of S corporations.

(PRWEB) December 16, 2004 -- Entrepreneur Peter Hupalo wrote "How To Start And Run Your Own Corporation: S-Corporations For Small Business Owners" to help entrepreneurs and small business owners who are starting S corporations.

"How To Start And Run Your Own Corporation: S-Corporations For Small Business Owners" discusses the taxation of S corporations in detail, including sample tax forms for a fictitious company.

"Many new entrepreneurs examine the S-corporation tax returns, the 1120S income tax return, and the shareholder K-1 forms and are confused. My book breaks down the tax forms line-by-line and explains intermediate topics like the Accumulated Adjustments Account (AAA) and Schedule M-2," says Hupalo.

Other book topics include: stock basis; issuing shares, shareholder loans to the corporation; valuing a small corporation; par value versus non-par value stock, worker's compensation, withdrawing money from a corporation in the form of salary and dividends; the effect of Social Security and unemployment insurance on officer salaries; and how to minimize taxes.

"Among sophisticated entrepreneurs, the S corporation is a very popular option, because an S corporation allows the entrepreneur to save thousands of dollars in self-employment taxes," says Hupalo.

Other popular business structures include sole proprietorships (Schedule C businesses) and Limited Liability Companies (LLCs). Sole proprietors file IRS Schedule C along with their personal 1040 income tax return. Limited liability companies are disregarded as tax entities. LLCs file as sole proprietorships if one person owns the company or as partnerships if the business has several owners.

"The net income from sole proprietorships and LLCs is subject to self-employment tax, which includes Social Security and Medicare tax," notes Hupalo. "But, S-corporation owners can pay themselves reasonable wages or salaries and then remove the rest of the money in the form of employment-tax-free dividends," says Hupalo.

Hupalo notes that not all businesses should operate as S corporations. In particular, S corporations are more complex than sole proprietorships or limited liability companies. S corporation owners must adequately document their companies' high-level decision making with corporate resolutions and corporate minutes. And, Hupalo says that businesses which plan to sell shares to many investors, either through Small Corporation Offering Registration (SCOR), private placements, or even employee stock options often operate as C corporations.

"C corporations are a good choice for a business which hopes to retain most of the company's earnings and grow the business. Many technology companies or biotech companies need to raise substantial amounts of capital to make the business viable. Those businesses aren't usually concerned with removing extra cash flow from the business," says Hupalo.

Hupalo's online article to help entrepreneurs decide between an S corporation or a limited liability company can be found at:

http://www.hcmpublishing.com/Essays/S-corporation-vs-LLC.html

(Book: "How To Start And Run Your Own Corporation: S-Corporations For Small Business Owners." HCM Publishing. http://www.hcmpublishing.com)

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