Legal Question in Business Law in Florida

Re: Corporation and Personal Accounts are they one?

Whether you are an S corporation or a C corporation, you do not have to pay yourself a salary. Assuming you are the only shareholder in your corporation, you have elected to have an S corporation because of its tax banefits as a pass-through entity for tax purposes. However, your sister is tight in advising you not to pay for corporate expenses from your personal account. While it may seem as a mere formality and useless paperwork, such formalities are what, under statute and case law, grant you the liability benefits of a corporation, for starters. It is very common, and although contrary to good common sense, to comingle your personal accounts and affairs with those of the corporation. The corporation need be an entity in itself, separate from you; an entity that generates its own tax liabilities; an entity that will answer for claims against it. Otherwise, you are in the process of creating an alter ego; thereby, creating an extension of yourself and nothing else - thus, rendering your efforts and expenses futile in lieu of liability. In short, you and the corporation could be treated as one and the same and you would be personally liable for any claims against the corporation and endanger your personal assets. Also, you want to make sure that your corporation is not undercapitalized for the liabilities it may encounter as a matter of course in its ordinary business. Thus, you need not pay yourself a salary, although it is a great tool for manipulating operating expenses. Since your corporation is considered an S corporation, for tax purposes, you are presummed to have paid yourself all the income generated after expenses - more as if you were self-employed. Talk to your accountant about this. But, you need to invest in your corporation and write checks for the corporation's expenses from its account. In much the same manner, do not create a habit of having your corporation pick-up your tab for personal and unjustifiable expenses. God's speed.

Re: Corporation and Personal Accounts are they one?

Paying yourself a salary creates a tax liability for payroll tax and you must remit payment to the IRS the following month by the 15th. Speak with your accountant about this. Initial upstart of a company is difficult to deal with - but you can invest money into the S, which can be paid back to yourself as return of the loan and thereby not a tax event. Again, speak with your accountant.

I reviewed the other response by one attorney and I disagree with her emphasis on "alter ego". Florida is a state that is very difficult to "pierce the corporate veil" whereby you would be personally liable for your company's debts. Just begin to operate the company going forward as best as possible and pay your debts.

Good luck.

Re: Corporation and Personal Accounts are they one?

For tax purposes the Coporation must be paying the bills not you.