sorry to be so long in responding.
According to the IRS:
To qualify for S corporation status, the corporation must meet the following requirements:
Be a domestic corporation
Have only allowable shareholders
May be individuals, certain trusts, and estates and
May not be partnerships, corporations or non-resident alien shareholders
Have no more than 100 shareholders
Have only one class of stock
Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).
fair enough. i was going more for a ham sandwich can be an s corp rather than hormel can be an s corp, but i was imprecise - you're right most c corps could not be s corps.
I know this has been discussed before, but I really think you should get a qualified opinion on this. If you are an employee, your employer is almost certainly required to withhold payroll taxes from your income. Does not matter whether you are a flesh and blood person or an s-corp. I mean, if we employ a nanny for more than $2,000/year we are required to withhold payroll taxes.
i'm not an employee. neither are any of the people i work with (at least not the ones contracting through the same company that contracts me). we are all independent contractors, the discussion is simply whether to be sole props, partners or s corps.
I'm not sure exactly how to look this figure up, but...come on.
you're looking at stuff that doesn't matter (employees, size) as well as stuff that matters less (capital investment). we're talking about taxes. what matters is the tax structure. personnel expenses occur prior to taxation - they are irrelevant. the key difference is what ksu-w identified: s corps are taxed once, just like an individual. c corps are independent entities - their income does not pass through to the owners, hence profits are (eventually) taxed twice. to give an s corp a tax rate comparable to a c corp would be inherently unfair to the owners of the c corp because the c corp shareholders would be subject to additional taxation before assuming control of that income. to give an s corp a rate lower than an wage-earning individual is inherently unfair to the wage earner because the income of the s corp passes through directly to the owner(s) in exactly the same fashion that wages pass to wage earners.
i'll give you that there is some distinction between the income of a pass through attributable to return on capital invested vs compensation for labor. however, the lower tax rates on income from capital than income from labor seems to me to be the root problem in our tax code, so i'm not particularly sympathetic to that argument.
