Sole to Scorp

[Unregistered]

Client - Sole Practioner - Doctor. Has been in practise for more than 17 years.

Now he wants to convert to Scorp.

Is there anything I need to look out for?

One thing I will tell him to make it effective as of Jan 01, 2007
Client des not have Balance sheet or P & L as he was sole propriter.

Thanks!

[Bees Knees]

I would ask why he wants to be an S corp. If he says because he needs liability protection, I would say the S corp will not shield him from his own malpractice. If he is just interested in general business liability, an LLC will do the same.

Why be an S corp? There are some tax reasons...you might save on Social Security Tax. Chances are, though, he is thinking about the liability issues. And I would look at the lack of a P&L. Why? Is this client not capable of acting like a corporation, such as having a proper bookkeeping system in place?

[Jiggers]

Corporate books

You need to explain to your client that a corporation requires formal books. Also, the money in the bank account will no longer belong to him, it belongs to the corporation. He will be required to have payroll taxes withheld from funds taken from the corporation. No personal expenses can be paid from the corporation's funds.

[DaveinTexas]

If he owns 95% of the stock

of this corporation, won't it be considered a personal service corporation taxed at a flat 35%?

That would be something to be aware of before he incorporates.

Here's a side question; can a personal service corporation elect to be taxed as an S corporation?

[Unregistered]

I would ask why he wants to be an S corp. If he says because he needs liability protection, I would say the S corp will not shield him from his own malpractice. If he is just interested in general business liability, an LLC will do the same.

Why be an S corp? There are some tax reasons...you might save on Social Security Tax. Chances are, though, he is thinking about the liability issues. And I would look at the lack of a P&L. Why? Is this client not capable of acting like a corporation, such as having a proper bookkeeping system in place?

Would it be better to do LLC than S corp?

Client is organized. I have not seen such a organized client! He does have each and every receipt but he has not prepared formal P & L. Although he is a doctor, he is also MBA! He is going through estate planning with high priced lawyer. I am thinking that it is coming from there. I will explain him in person when I will see him next week

He rents his office and few equipments. I suppose, I need to find out value of each asset as of 01/01/07 after depreciateion.

[Bees Knees]

of this corporation, won't it be considered a personal service corporation taxed at a flat 35%?

That would be something to be aware of before he incorporates.

Here's a side question; can a personal service corporation elect to be taxed as an S corporation?

Section 11(b)(2) is the code section that says personal service corporations cannot use the graduated tax rates (thus subject to a flat 35% tax rate). Section 11(b)(2) says to look at Section 448(d)(2) for the definition of a personal service corporation for purposes of that rule. Section 448(a) says that Section 448 applies to either a C corporation, a partnership with a C corporation partner, or a tax shelter.

S corporations are not subject to PSC rules. That is one reason why you would want to be an S corporation if you are a service business that insists on operating as a corporation.

[KC-CPA]

S Corp for Doctor?

In reading this thread, I have a client that is a Doctor and wants to save on taxes, the doctor thinks the taxes can't be right.


Currently doctor is Sole Proprietor, Contract Labor $300k, net profit $275K, AGI $256K.

doctors deductions:

1/2 self employment tax
Health insurance deductions
and schedule A Itemizations

So in my task to help the "poor" Doctor, i am trying to help her minimize her taxes and wanting to make sure I don't miss something.

Here are my questions/thoughts:

Maximize retirment account
maybe she should be an S Corp? (Previous accountant told her that would not help her in anyway) Is there a better business structure for her?
Are there other strategies that should be applied?

Since I don't have the experience with this, I thought I would reach out to the experts to minimize my lessons learned (cost, stress, etc)

Any thoughts/recommendations/mentoring would be appreciated.

[ChEAr$]

Would it be better to do LLC than S corp?

Client is organized. I have not seen such a organized client! He does have each and every receipt but he has not prepared formal P & L. Although he is a doctor, he is also MBA! He is going through estate planning with high priced lawyer. I am thinking that it is coming from there. I will explain him in person when I will see him next week

He rents his office and few equipments. I suppose, I need to find out value of each asset as of 01/01/07 after depreciateion.

Wait a minute. What's this about 1/1/2007? is he perchance behind on filing tax returns since 2006? If so, he's got a problem. And you've a hell of a lot of work to do. (KAching!

And at this late date he surely can't go back an make a new corporation retroactive to 1/1/2007.

[gboykin]

Wait a minute. What's this about 1/1/2007? is he perchance behind on filing tax returns since 2006? If so, he's got a problem. And you've a hell of a lot of work to do. (KAching!

And at this late date he surely can't go back an make a new corporation retroactive to 1/1/2007.

Look at the date of the thread. The post prior to yours is a post on a thread back to 2006.

[JoshinNC]

Is your doc client receiving a 1099?

In reading this thread, I have a client that is a Doctor and wants to save on taxes, the doctor thinks the taxes can't be right.


Currently doctor is Sole Proprietor, Contract Labor $300k, net profit $275K, AGI $256K.

doctors deductions:

1/2 self employment tax
Health insurance deductions
and schedule A Itemizations

So in my task to help the "poor" Doctor, i am trying to help her minimize her taxes and wanting to make sure I don't miss something.

Here are my questions/thoughts:

Maximize retirment account
maybe she should be an S Corp? (Previous accountant told her that would not help her in anyway) Is there a better business structure for her?
Are there other strategies that should be applied?

Since I don't have the experience with this, I thought I would reach out to the experts to minimize my lessons learned (cost, stress, etc)

Any thoughts/recommendations/mentoring would be appreciated.

If so, from whom? Why? What exactly is she doing to generate this 1099?

[oceanlovin'ea]

me too, chEAr$

LOL!! That was what I thought when I started to read the thread. Who thinks this is 2006? Then I looked at all the dates.

Linda, EA

[KC-CPA]

Sole to S Corp

Yes she receives a 1099 from the hospital for contract labor

[KC-CPA]

Sole to S Corp

Sorry for the confusion guys, but you got it right. All tax returns are up to date, the doctor is wanting advise going forward regarding her structure and minimizing her taxes.