No Income on S-corp currently. What happens when the S-corp starts generating income?
I want to start a S-corp. The company will not generate any income atleast of for 1 year. Probably after a year the company may start generating some income. I also have a fulltime job. When the S-Corp starts generating income and Iam the owner of the that S-corp, do I need to get paid a minimum salary? What if the company makes very less say $1000 in a year?
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This might answer part of your question: http://www.brightjourney.com/q/incorporate-start-paying-salary. In fact, yours is worded a little differently, but there's a possibility that it's actually a duplicate. – rbwhitaker 12 years ago
1 Answer
I'm no tax attorney. Having said that, as @rbwhitaker mentions, the question of when you start to take a salary has already been asked.
However, from a tax perspective, as I understand it, it makes no difference if you take a salary or not if you're an S-Corp. With an S-Corp any profit that the company generates automatically flows to your own personal tax return. In contrast, if you were a full blown C-corp, any profit would be taxed at the Corporate tax rate. If you, then, also paid your self a salary, that portion would be taxed at your personal income tax rate bracket.
Make sense?
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Also worth noting that you will generally have to pay self-employment tax on the S-corp's revenue. I say "generally," because any amounts above a reasonable salary are considered a return on your investment, and not employment income. But, most people never hit that. – Chris Fulmer 12 years ago
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+1 my S-Corp is starting to profit, so it flows through to my personal income taxes. I use payroll to help keep my S-Corp as close to even as possible. So while revenue might be $500k, "income" is less than $10,000. – Chris K 12 years ago
