Sole proprietor goodwill to c corp

[Lexi D]

I have a client that just formed a c corp. He has a client list that he wants to sell to the c corp. If this is consider goodwill he will run into the anti churning rules. Is there any way around this problem legally? and if so how? Also he does not want to do a W2 because that would cause him to have to pay futa and suta and workmens comp. Can he be a stautory employee of his own company, or does he have to bite the bullet there too?

[OldJack]

As you said "He has a client list that he wants to sell to the c corp." Does he also want to recognize the taxable gain on his 1040 and pay the tax? Even doing that becomes a question as you have pointed out.

This client has to be made aware that he is NOT the C-corp and only has voting rights of control and distribution. A C-corp is a separate person in the eyes of the tax laws. As an active officer in the C-corp he is by definition an "employee" and about the only way for him to get money out of the C-corp is by W2 salary, taxable dividends (double tax), or rental of property to the C-corp. He is not a statutory employee. In certain cases he may be able to be a (1099-Misc) independent contractor such as if he was providing CPA services to the C-corporation where the corporation is not an accounting firm and that service being unrelated to him as a shareholder employee.

[Lexi D]

Thanks

Thanks for the info just that right words to tell the client .