S Corp Issues with NY and NJ

[gregt75]

I have a client who is based out of NJ but originally registered his S Corp in NY. He runs his own public relations business out of NJ. He started making more money and needs to pay himself a salary. He set up an account with a payroll company but they will pay him as though he works in NJ because the address of his business is in NJ. Last year, I filed his S Corp return for NY and NYC but not NJ since he is not registered in NJ. I am wondering if it will raise a red flag with NJ and require him to file an S Corp return with NJ. I think his S Corp should be incorporated in NJ instead of NY since he is based in NJ. Most of his clients are in NY but he does the work out of his NJ office. He looked into dissolving his NY S Corp and creating a NJ S Corp but he was advised by attorneys that it could cost a lot to do that. Any suggestions would be helpful. Thanks.

[BOB W]

I have a client who is based out of NJ but originally registered his S Corp in NY. He runs his own public relations business out of NJ. He started making more money and needs to pay himself a salary. He set up an account with a payroll company but they will pay him as though he works in NJ because the address of his business is in NJ. Last year, I filed his S Corp return for NY and NYC but not NJ since he is not registered in NJ. I am wondering if it will raise a red flag with NJ and require him to file an S Corp return with NJ. I think his S Corp should be incorporated in NJ instead of NY since he is based in NJ. Most of his clients are in NY but he does the work out of his NJ office. He looked into dissolving his NY S Corp and creating a NJ S Corp but he was advised by attorneys that it could cost a lot to do that. Any suggestions would be helpful. Thanks.

He should register as a foreign corporation in NJ (since he doesn't want to give up his NYS Corp). He will have to file both NYS and NJ Corp returns. On his NYS Corp make the Issurer's Allocation "0".

I think going with a new NJ Corp would be, in the long run, easier unless there are plans to do NY income or moving back to NY.

[Roland Slugg]

I can't address your NY or NJ concerns, but am posting a reply anyway to just invite you, and your client, to objectively ask yourselves and seriously consider the following question: "Does he really need a corporation ... at all?"

There is no need to reply to that question here, on this board, but I urge you not to simply dismiss the question, knee-jerk style, claiming some vague notion like liability protection. Many people form corporations but don't have the foggiest idea why. "The lawyer recommended it" is the excuse I hear most often, but if pressed for an explanation as to why, the owner (and many tax advisers) are unable to come up with any compelling reasons. However, if asked to list reasons why a corporation may not be necessary, the same owner could probably list several ... and you listed some pretty good ones in your O.P.

Think about it.

[TAXNJ]

Register

I have a client who is based out of NJ but originally registered his S Corp in NY. He runs his own public relations business out of NJ. He started making more money and needs to pay himself a salary. He set up an account with a payroll company but they will pay him as though he works in NJ because the address of his business is in NJ. Last year, I filed his S Corp return for NY and NYC but not NJ since he is not registered in NJ. I am wondering if it will raise a red flag with NJ and require him to file an S Corp return with NJ. I think his S Corp should be incorporated in NJ instead of NY since he is based in NJ. Most of his clients are in NY but he does the work out of his NJ office. He looked into dissolving his NY S Corp and creating a NJ S Corp but he was advised by attorneys that it could cost a lot to do that. Any suggestions would be helpful. Thanks.

Based on your comment "runs his business out of NJ", then the client should register his business with NJ. As far as a "red flag", wave a "White flag" and get the client correct for NJ filing before he gets many red flags.

Info is on the NJ tax website as what to do.