SEMINAR ON THE BENEFITS OF INCORPORATION

In the United States there are two tax systems. One for the poor and uneducated Make Money Pay Taxes Spend Money One for the wealthy and educated Make Money Spend Money Pay Taxes

-Loral Langemeier Author of the Millionaire Maker The greatest benefits of incorporation are the tax savings and shield of liability provided by such entities. Most Americans overpay ridiculous amounts of money in taxes every year simply because they are uninformed as to the benefits of entity formation, and specifically incorporation.

This Seminar will discuss the following:

What are the benefits of incorporation and why should you incorporate yourself? What are the differences between a C Corporation, an S Corporation and a Limited Liability Corporation? Which entity is the right entity for you and why?
LAW OFFICES OF ADELA Z. ULLOA, APC BENEFITS OF INCORPORATION -1-

What are the costs associated with incorporation?

LAW OFFICES OF ADELA Z. ULLOA, APC BENEFITS OF INCORPORATION -2-

WHAT ARE THE BENEFITS OF INCORPORATION AND WHY SHOULD YOU INCORPORATE YOURSELF?
Limited Liability

o A Corporation is deemed a separate entity, meaning it is its own individual and its assets and liabilities are separate than those of the owners, also known as the shareholders. In order to maintain this separateness, you must: Have a separate corporate bank account and not commingle your assets. o Example of How This Benefits You: You are not liable for the business debts or liabilities. Meaning if you are sued for negligence arising out of your profession, they cannot come after your personal assets (home, bank accounts, car, etc).
Tax Savings

o There are approximately 150 allowable expense deductions for S corporations point is to try to zero out the corporation and minimize taxable income. Further, you do not pay self-employment tax, and can get creative with income and distributions! Examples: Insurance; Home Office; Travel/Mileage Expenses; Business Entertainment Expenses

o Ex: Take client out to lunch Costs of doing business o Business cards, advertisement
LAW OFFICES OF ADELA Z. ULLOA, APC BENEFITS OF INCORPORATION -3-

WHAT ARE THE DIFFERENCES BETWEEN A CCORPORATION, AN S-CORPORATION AND A LIMITED LIABILITY COMPANY?

C Corporation - An entity providing limited liability that is

taxed on its income double taxation meaning the company pays tax on its income, and the shareholder pays tax on the dividend/distribution. There are no limits to the number of shareholders.

S Corporation Corporations, which like sole proprietorships and partnerships, are pass-through entities. That is, there is no Federal income tax levied at the corporate level. Instead, an S-corporations profit is allocated to its shareholder(s) and taxed at the shareholder level. . Close Corporation - Small privately held corporation that allows you to skip the formalities required of general corporations, such as annual meetings and documented minutes o Designated as Close Corporation in the Articles of Incorporation that are filed with the Secretary of State Limited Liability Company - An LLC is a hybrid business entity that is treated like a corporation in terms of limited liability and like a partnership in terms of taxation. An LLC, although a business entity, is a type of unincorporated association and is not a corporation. o Generally used to purchase real estate
LAW OFFICES OF ADELA Z. ULLOA, APC BENEFITS OF INCORPORATION -4-

S- CORPORATION OVERVIEW
Electing to be taxed under the provisions of Subchapter S of Chapter 1 of the Internal Revenue Code allows the corporation to avoid paying taxes directly on its profit, but rather to pass the profit and losses on to the shareholders who pay the taxes on their individual income taxes just like partnership taxation. S Corporations are limited to corporations with less than a specific number of shareholders. o This designation is made with IRS Form 2553 o An S-corporations annual tax return is filed on Form 1120S that consists of: A section detailing revenues, a section detailing expenses, and a section for calculating the amount of tax owed.
o In addition to the above, Form 1120S also includes a

Schedule K as well as a Schedule K-1 to be filled out for each shareholder. The Schedule K and Schedules K-1 are used to show how the businesss profit or loss is allocated among the owners.
Average Tax Savings is at least $9,000 a year! Be Careful Although S corporations flew under the radar for

quite some time, the IRS is now becoming more aggressive.

o For example: The IRS holds that shareholder- employees

will be allowed the deduction for health insurance premiums only if the S-Corporation establishes the health insurance plan and purchases the coverage. Shareholderemployees who purchase coverage under their own name cannot use the above- the-line deduction, but can still include the premiums as an itemized deduction, subject to the limitations on medical expenses.
o Retain a knowledgeable CPA LAW OFFICES OF ADELA Z. ULLOA, APC BENEFITS OF INCORPORATION -5-

WHICH ENTITY IS THE RIGHT ENTITY FOR YOU AND WHY?

A CLOSE/PRIVATELY HELD S CORPORATION

o If you are an individual, a Close S Corporation will be the best corporate structure for you based on the circumstances. o Many small-business owners prefer the Close Corporation because they find the benefit of not having to comply with corporate formalities invaluable. In essence, a close corporation is a corporation whose shareholders and directors are entitled to operate much like a partnership.
Dont need to have yearly shareholders meeting and

record annual minutes in the corporate books

o Most small businesses are structured as S corporations

in order to benefit from the partnership taxation and allow the owners to pass through all of the losses individually.
o

You can benefit from the limited liability shield while receiving advantageous expense deductions and tax treatment.

WHAT ARE THE COSTS ASSOCIATED WITH INCORPORATION?

FRANCHISE TAX - Corporations pay a franchise tax of 1.5% of net income in the state of California (minimum $800)
PAYROLL TAXES - The new S Corporation must file quarterly

and annual payroll tax returnseven if the only employee is the owner. It must also pay federal unemployment tax on the owners salary.
CPA CHARGES - An extra tax return is requiredand usually LAW OFFICES OF ADELA Z. ULLOA, APC BENEFITS OF INCORPORATION -6-

this tax return must be prepared by an enrolled agent, CPA or other tax professional.

LAW OFFICES OF ADELA Z. ULLOA, APC BENEFITS OF INCORPORATION -7-

LET THE LAW OFFICES OF ADELA Z. ULLOA, APC INCORPORATE YOU RIGHT NOW!
The $1350.00 attorneys fees will include the following, as well as all associated filing fees:

Articles of Incorporation, designating you as a Close Corporation and filed with the Secretary of State; Bylaws, specifically prepared for your corporation which designate the rights and powers of the shareholders, directors and officers; Statement of Information, prepared and filed on your behalf with the Secretary of State; Federal Tax Id Number Application, filed with the IRS on your behalf. IRS Form 2553, designating your corporation as an S corporation for taxation purposes and filed with the IRS;
Quick In Person Filing Generally takes over a

month to send and receive filed Articles, but our office will file them in person with the Secretary of State thereby reducing the process time.

LAW OFFICES OF ADELA Z. ULLOA, APC BENEFITS OF INCORPORATION -8-