06-21-2015, 08:36 PM
The benefit of the S-Corp is limited legal liability and should really only be seen as that. Of course, it is an advantage over a C-Corp taxwise... In a C-Corp, the company is taxed on the earnings, and the shareholders are taxed again when the dividend is paid. An S-Corp skips a layer of taxation and the owners are taxed the same as a sole proprietorship. The catch however, is that S-Corps have several regulations that effectively make them used only by small business, which is why everybody isn't doing it.
Back to the bottom line... You won't escape taxes by incorporating. If you need limited legal liability to protect yourself, you must incorporate, and should choose an S-Corp or LLC if you can. However incorporating ONLY for a perceived tax benefit will quickly end in pain.
My suggestion for lowering your investment taxes would be to use a tax preference account such as a 401k, Roth IRA, etc... Another way to lower your tax bill is to implement low turnover portfolio management strategy. Lastly, sell a losing position... Although in legal form you cannot offset dividends with capital losses, in economic substance, you can take your losses against your ordinary income and effectively reduce your bill. If I say anymore, I'll have to bill someone... LOL!
OK, here's the final nail in the coffin. The "S" election is terminated involuntarily if the corporation has passive income, (eg interest and dividends) in excess of 25% of gross receipts for a period of three consecutive years.
Back to the bottom line... You won't escape taxes by incorporating. If you need limited legal liability to protect yourself, you must incorporate, and should choose an S-Corp or LLC if you can. However incorporating ONLY for a perceived tax benefit will quickly end in pain.
My suggestion for lowering your investment taxes would be to use a tax preference account such as a 401k, Roth IRA, etc... Another way to lower your tax bill is to implement low turnover portfolio management strategy. Lastly, sell a losing position... Although in legal form you cannot offset dividends with capital losses, in economic substance, you can take your losses against your ordinary income and effectively reduce your bill. If I say anymore, I'll have to bill someone... LOL!
OK, here's the final nail in the coffin. The "S" election is terminated involuntarily if the corporation has passive income, (eg interest and dividends) in excess of 25% of gross receipts for a period of three consecutive years.