New accountant

Met with Ron and Shelli's accountant, Marc Schain. He was not a warm and fuzzy guy, which I liked. He's an accountant. He should be matter of fact. If he were anything else I would consider him to be a phony.

He spent the time, about an hour, to go over how the structure should be handled, the advantages of both s corp and llc.

I still think accountants push s corps because they make more money doing returns. But Marc admitted that lawyers push llc's. I could see that from the web. Not sure why. Is there more money in it for them?

Advantages of an s corp are both tax and retirement based. Joel was right that you can shield some income from self employment tax by taking part of your income as payroll and part as dividend. You take a reasonable salary, pay the 15.3% se tax and the rest is not taxed. But Marc futher explained that if the rest is put in a 401k it is shielded twice. He also mentioned that I can put $20.5M in a 401k (there's an extra $5M in there because I'm over 50), and as a corporation I can match up t 25% further shielding income. Plus my wife can be an employee and do the same.

Of course right now there isn't any extra money for 401k's but hopefully there will be.

There are quite a number of forms to be filled out, which are all part of the fees - unemployment state withholding. He does it all. I have to pay a tax payment on payroll on the 15th of the following month. There are payroll reports, quarterly tax returns that cost 350 and then an annual return that costs about 600. He said the year will be 1M, same as Joel.

Other fees 100 franchise tax.

LLC's cost less but don't have the same flexibility tax wise. llc's are more likely to get audited, which Joel said as well.

Overall I liked Marc. He gave good advice. Seemed to have this down to a science and doesn't cost more than Joel, although he said his annual personal tax return would be 325 to 400 which is higher than Joel.

I asked about referrals to attny and insurance broker. He said he'd think about it. Would have preferred he have an answer at his fingertips, but hopefully he will follow up.

Said to give him 3 potential names for the corp. Came up with Creston River Co., Crestondale Enterprises and Arbor Bach Co. Creston (name of my street in the Bx), River and dale for ... and Arbor = tree + bach.

I probably need to get a real web domain, and use an email address that is more professional. I can get a free address, website and email from MS. Free for a year, although I think the free email has ads on it. It costs $20 a year to get email without ads, and the domain and web address is $15 a year after the first year. So about $35 per year total, which seems to be way cheaper than the web hosting services, which run well over $50/yr.

Per Marc, if I wind up taking a permanent job and need to dissolve the corp., the cost is about $150 and all that's necessary is to file some forms.

Assuming I make $100M (hopefully a lot more), I can set my payroll at $70M and shield the remaining $30M from se tax. That should save 4,500, which more than makes up for the extra cost of the corp.

I can deduct the office space (have to measure it out). If total mortgage is $1370, and average utilities are $500 and insurance is $40, and taxes are $800, then total monthly cost of the house is $2700. If the office space is 10% of the house, then I can charge rent for $270 per month. That's a deduction of $3,240, not including repairs and maintenance. I can deduct my mileage at a rate of 58.5 cents, although that is likely to go down due to the reduction in gas prices.

Cobra is not a permitted deduction, but if I pay it out of the corp ...

The rule is that insurance has to be available to all employees and that can't happen with cobra. But I can get a plan under the corp. that costs about the same. Marc mentioned the Chamber of Commerce, which I guess is where Ron heard about it. There are also small business organizations that work as well, plus NY has some sort of sponsored plan.

The total cost of setting up a corp. should be 750 total, which is about what Joel said.

He asked me if I needed an attny for anything else. I mentioned the engagement letter and contractor letter. He suggested getting a sample for the atty to review. It will cost too much if he has to come up with it himself. That's good advice.

My wife should definitely be a stockholder. It doesn't matter what percentage. There is no advantage for her to be on the payroll right now. Maybe later if there is a 401k or pension advantage.