For a C-Corp., in Oregon, are there any regulations concerning the number of board members? Can I be a 1-person board?
That is actually true in pretty much all states. The election to be an S-Corp is a federal one. I would still like to know why he has opted to remain a C-Corp, as it generally results in double taxation.Corporations in Oregon all start off as C-Corps and can forever remain C-Corps - but at any time after formation they can be changed to S-Corps, a change generally for tax reasons.
With a C-corporation, the corporation files a Form 1120 and pays tax itself on its own income. Currently, the net income of a C-corporation is taxed at a flat rate of 21%. Then when the corporation pays out the profit as dividends to shareholders the shareholders are again taxed on that dividend as ordinary income. The rate on that will depend on the total income that the shareholder has, which could be anywhere from 15% to 39.6%. Thus, potentially the profit of the corporation is subject to tax twice — the corporation pays a tax of 21% on it and then the shareholder receiving a dividend is then taxed anywhere from 15% to 39.6% on the it, resulting in very high tax on the income. The corporation may deduct the salary it pays you, reducing the corporate net income, but of course that salary is ordinary income to you and, furthermore, is subject to FICA (Social Security and Medicare taxes). If a C-corporation pays excessive salary to its officers the corporation deduction for the excess salary may be disallowed.Is what LdiJ referring to, as double tax, the corporate income tax, from filing 1120; and then personal income tax from filing 1040 with a w-2 issued by corporation?
Just reached out to tax attorney in Eugene, Oregon -- I hope he replies to the contact form on his website. Thanks for all this wonderful free advice.Discussing the pros and cons of C-Corp versus S-Corp, with a professional in Oregon, would be smart.
I am world traveler. If I encounter some venture capitalist abroad, I want to be able to offer investment opportunity.However, to qualify as a S-corporation, you are limited to one class of stock and no more than 75 shareholders, all of whom must be individuals and cannot be non resident aliens.
There are lots of ways you might do that and still qualify as a S-corporation. And if you did need to issue a second class of stock (e.g. preferred, nonvoting, etc) to make the investment work or if you needed to issue stock to someone who would not qualify as a S-corporation shareholder you could always convert to a C-corporation at that time.I am world traveler. If I encounter some venture capitalist abroad, I want to be able to offer investment opportunity.
I think it is important to consider not only federal taxes but state taxes as well so it is good that you have reached out to a tax attorney in Oregon.Just reached out to tax attorney in Eugene, Oregon -- I hope he replies to the contact form on his website. Thanks for all this wonderful free advice. ...