Legal Question in Business Law in New York
S-Corp Wages required? Accountant?
I have 2 questions I hope you can help me with. As a S-corp would I be required to put myself on the payroll or since I am going to be taxed on all profits anyway can I not do this and just do strictly dividends?
Some people tell me because of the amount of money I'm expected to make that I should hire an accountant, however on a show the person said most people hire accountants for doing the taxes not for recordkeeping and that the accountant probably uses the same software that you would use on your own. People I have talked to agree to this and also say the accountant would know everything about you through your money and I don't want that or risk them being able to steal money. There is a great tax software out now for businesses that basically fills the info out for you and the government has a program in which the tax would come straight out of the corporate account and I can e-file. So is an accountant necessary when your dealing with large sums of money?
1 Answer from Attorneys
Re: S-Corp Wages required? Accountant?
Just because a subchapter "s" corporation is considered a pass-through entity for federal and state tax purposes (note that some muncipalities, including NYC, do not recognize an exemption from entity-level taxes) and because business income is taxed at the shareholder level, the law does not require you to put yourself on the payroll and draw a salary. There may be tax or other reasons to make yourself an employee but you don't have to be one if you decide not to and compensate yourself as a shareholder with a dividend stream only. Before you elect your subchapter "s" status and start doing business, though, make sure to get advice on the proper structure of your corporation and tax planning.
Whether or not you decide to hire an accountant for other than tax reporting purposes is a business decision. Most entrepreneurs chose to focus on what they do best and delegate all other functions to relevant professionals, including lawyers, accountants, etc.
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