Guidance

[bilnmad]

I want to set up the best tax and liability situation in North Carolina to operate under a ride share like Uber or Lyft. I do not want income, I only want the income generated to pay for the vehicle and all maintenance and grow the business into other opportunities. I would simply be able to operate the company car for personal uses. Then the ride share company file its own corporate taxes with no wage distribution.

I have rental properties and other investments that I do not want any potential liability from the ride share. I'm familiar with aspects of record keeping, taxes, and structure for my LLC but I want this set up completely on its own with no wages or dividends paid. The research I have done says C Corp but I wanted to see what the folks that really know say.

 

[quincy]

You want to drive paying passengers around only so you can meet the costs of operating your car? Am I understanding your business plan correctly?

 

[bilnmad]

As stated.....and grow the business into other opportunities.

 

[quincy]

As stated.....and grow the business into other opportunities.

Perhaps you can explain your no-income plan better?

 

[LdiJ]

I want to set up the best tax and liability situation in North Carolina to operate under a ride share like Uber or Lyft. I do not want income, I only want the income generated to pay for the vehicle and all maintenance and grow the business into other opportunities. I would simply be able to operate the company car for personal uses. Then the ride share company file its own corporate taxes with no wage distribution.

I have rental properties and other investments that I do not want any potential liability from the ride share. I'm familiar with aspects of record keeping, taxes, and structure for my LLC but I want this set up completely on its own with no wages or dividends paid. The research I have done says C Corp but I wanted to see what the folks that really know say.

Your company has to have someone to drive the car, therefore it has to have wages.

 

[bilnmad]

Thanks to all for the questions!! I want to build capital, retain said capital, and venture into other opportunities as capital is achieved. LdiJ that's one of the things I was wanting to make sure of. Being that I would be said driver could I not volunteer my time for a period of time to cover costs and build capital while at some point in the future pay myself dividends as I would be the only shareholder? I am in a unique situation that need not discussed simply looking to build and grow capital. I do not have a problem paying due taxes, that's one of the MAJOR problems in the United States but that also need not be discussed. That's for another thread or another forum. I simply don't want or need income from this venture at this point, capital growth and company growth are the goal in the right company structure to acheieve said goals without capital distribution for wages or dividends.

 

[bilnmad]

achieve not acheieve lol

 

[PayrollHRGuy]

I think I know what you are getting at. Please tell me if I am wrong.

You want to be a driver, pay your expenses of being a driver and bank without paying taxes on what would have been your profits for use in future business ventures.

Sound about right? If so, that isn't going to happen unless those business ventures and the expenses that go along with them happen in the same tax year.

 

[bilnmad]

I have no problem paying the taxes on profits each year. I just want that taxation and profit to be a separate entity where I would only recieve payment in the form of dividends or wages when I chose to.

 

[LdiJ]

I have no problem paying the taxes on profits each year. I just want that taxation and profit to be a separate entity where I would only recieve payment in the form of dividends or wages when I chose to.

Here is part of the problem...

As a C-corp you are going to pay corporate income tax on the profit. You will also have to pay personal income tax on the profits when you eventually pay them out to yourself. Therefore, you will have double taxation on the profits. If you hope that the same corporation will be able to do whatever else you want it to do, as well as provide rides to people, you may not be correct. You may have to take money out of the corporation in order to invest it in other activies. In any case, one way or another, if you are to have personal use of the money, either early on or years down the road, you are going to be paying taxes on it twice.

As an S-corp you avoid double taxation, but you absolutely without question must pay yourself a reasonable wage, because the IRS will consider whatever profits you have to be wages up to a reasonable amount. In the case of a single shareholder entity that provides a service (like a ride) that is generally going to be close to all of the profit.

 

[PayrollHRGuy]

I have no problem paying the taxes on profits each year. I just want that taxation and profit to be a separate entity where I would only recieve payment in the form of dividends or wages when I chose to.

I don't see the point of that. And as @LdiJ wrote it will likely end in double taxation.

Maybe if you explain why you want to do it someone here could better direct you.

 

[LdiJ]

I don't see the point of that. And as @LdiJ wrote it will likely end in double taxation.

Maybe if you explain why you want to do it someone here could better direct you.

He already did. He wants to build up money in the corporation so that he can invest it in some other kind of business opportunity. He just doesn't seem to understand how it all works.

 

[PayrollHRGuy]

I asked him if that was his goal back in post #8. He said he didn't mind paying taxes. So I really don't understand what he wants and I really don't think he does either.

 

[Taxing Matters]

As an S-corp you avoid double taxation, but you absolutely without question must pay yourself a reasonable wage, because the IRS will consider whatever profits you have to be wages up to a reasonable amount. In the case of a single shareholder entity that provides a service (like a ride) that is generally going to be close to all of the profit.

We've discussed this before, and that is not an accurate statement of the tax law. Nothing in the tax law compels the S-corporation to pay a salary. What the tax law says is that for a shareholder/employee of the S-corporation any money or property he/she receives from the corporation will first be treated as wages for the work the shareholder/employee has ever done for the corporation up to the point that the shareholder/employee has been paid reasonable compensation for the work he/she provided. That's true no matter how that distribution is characterized by the corporation. That treatment is NOT in any way tied to the profit of the corporation, by the way. So at some point, if and when the person takes something out of the corporation, there will be a reckoning of sorts to account for the compensation for the work peformed. But that could be years off in the future. The corporation could retain all the money and property until then to reinvest in other business ventures and there would be no wages for the shareholder/employee that would be taxed. As a result, a new business could forego paying a salary to the shareholder/emmployee in the first couple of years during the start and avoid the costs and taxes of that in an order to develop and grow the business. Down the road, though, once the shareholder/employee starts taking out money or property from the corporation those wages will have to be accounted for.

Of course, the S-corporation net income (profit) still flows through to the shareholder and the shareholder will pay tax on that. No matter how the business is organized, the OP is going to have to pay income tax on any profit. The amount of tax may vary depending on how it is organized, though, so the type of organization does matter.

 

[LdiJ]

TM,

Yes, we have been over this before...but I feel that the way that you explain it is extremely confusing for laypeople.