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Lawyer as "S" Corp?

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    #1

    Lawyer as "S" Corp?

    If an attorney wants to be taxed as S corp, is this permitted? Or, are they forced into being a "Personal Service Corporation" by default? The more I read, the more confused I am.

    Barring the above, I assume that an LLC status could be established and then chose to be Schedule C on 1040, depending on state law.

    Any and all thoughts will be appreciated.

    LT
    Only in government or politics is a "cut in spending" really an increase. It's just not as much of an increase as they wanted it to be, therefore a "cut".
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    #2
    S-Corp

    Yes a lawyer could be an S-Corp. However, with recent court rulings you really have to watch the amount of wages that they need to take.
    I would put a favorite quote in here, but it would get me banned from the board.

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      #3
      An S Corp is a corporation. If a lawyer is allowed by his state to operate his practice in corporate form, and he wants to do so, then he should form one. You don't form an S Corp. If the shareholder(s) of a corp wants it to elect S Corp tax status, and the corp otherwise qualifies, he makes the election to do so.

      Many people refer to having an S Corp, and when discussing tax issues, we understand what they mean. But this is a misnomer ... there is really no such legal entity. A so-called "S Corp" is just a regular corporation whose shareholder(s) has elected for the corp to be taxed more like (but not exactly like) a partnership.
      Roland Slugg
      "I do what I can."

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        #4
        Attorney as S-Corp.

        I had an attorney who had been operating as a C-corp. He owned the firm, but did not manage it or work there and didn't even live in the same state, but the IRS tried to tax it as a personal service corporation.
        I contended that he did not perform services, so it should be taxed as a regular corp..

        They finally dropped the position that it was a personal service corp, but I got him to switch it to an S-Corp to preclude any further hassle with the IRS

        Comment

          #5
          Originally posted by Roland Slugg View Post
          An S Corp is a corporation. If a lawyer is allowed by his state to operate his practice in corporate form, and he wants to do so, then he should form one. You don't form an S Corp. If the shareholder(s) of a corp wants it to elect S Corp tax status, and the corp otherwise qualifies, he makes the election to do so.

          Many people refer to having an S Corp, and when discussing tax issues, we understand what they mean. But this is a misnomer ... there is really no such legal entity. A so-called "S Corp" is just a regular corporation whose shareholder(s) has elected for the corp to be taxed more like (but not exactly like) a partnership.
          Thanks for the comments Roland. I realize this, but my main concern was that, as taxxcpa said, if since it is service, that they would try to make it be taxed as PSC.

          And thanks for your observations also Matt.

          LT
          Only in government or politics is a "cut in spending" really an increase. It's just not as much of an increase as they wanted it to be, therefore a "cut".

          Comment

            #6
            Yes, as alluded to in another post above, PSC status does not apply to corps electing S Corp taxation. It really can't, since all the income flows through and is taxed to the shareholder anyway ... either in the form of salary or as flow-thru net income.
            Roland Slugg
            "I do what I can."

            Comment

              #7
              Originally posted by Matt Sova View Post
              Yes a lawyer could be an S-Corp. However, with recent court rulings you really have to watch the amount of wages that they need to take.
              No, a lawyer or any other taxpayer may not BE a corporation. He may of course form a corporation and then operate under it's aegis.
              ChEAr$,
              Harlan Lunsford, EA n LA

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