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#1
12-12-2006, 04:37 PM
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Going Incorporated
Hi, I have been reading up on the tax benefits of corporations and I have a bunch of questions. My apologies for the amount of questions but it seems as if there is a serious lack of literature on the subject.
1) Can any type of self employed work be considered an S-Corporation? For instance can a poker player or real estate investor create an S-Corporation? If so can this one person dabble in multiple fields? 2) I read that one can write off educational expenses in an S-Corporation how closely does this education have to relate to the business? 3) From what I have read it seems that one can not reinvest capital gains back into an S-Corporation and they have to claim all profits as dividends. Is there any type of corporation that one could create where a person could reinvest gains back into the corporation? If one could reinvest profits into the corporation, would one’s personal assets grow as the corporation grew? I was thinking it would not since the corporation is its own entity, but at the same time the owner is the majority shareholder. 4) What are the downfalls of a corporation? Is there a specific amount of revenue one should have to start one? P.S if this is the wrong forum, please feel free to move it. 
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#3
12-12-2006, 07:19 PM
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Re: Going Incorporated
[ QUOTE ]
1) Can any type of self employed work be considered an S-Corporation? For instance can a poker player or real estate investor create an S-Corporation? If so can this one person dabble in multiple fields? [/ QUOTE ] I wouldn't say *any*; your self-employed work has to offer a service (easy examples are lawyers and doctors). A poker player CAN plays under a corporation but then things get complicated because the corporation is now a gambling corporation and they have a different set of regulations on their own (which offset the advantages of why you would incorporated yourself in the first place). You can incorporated as a real estate investor (though some choose to do LLC instead for tax purposes). The reason is the IRS does not allow a S-corporation's passive income to be more than 25% of the S-corporation 3 years in a row. LLCs do not have such restriction. [ QUOTE ] 2) I read that one can write off educational expenses in an S-Corporation how closely does this education have to relate to the business? [/ QUOTE ] You can write off anything that is related to the business, not just educational expenses. [ QUOTE ] 3) From what I have read it seems that one can not reinvest capital gains back into an S-Corporation and they have to claim all profits as dividends. Is there any type of corporation that one could create where a person could reinvest gains back into the corporation? If one could reinvest profits into the corporation, would one’s personal assets grow as the corporation grew? I was thinking it would not since the corporation is its own entity, but at the same time the owner is the majority shareholder. [/ QUOTE ] This is an intersting point and I hope someone can answer it since I can't find my "Incorporated Yourself" book. The easiest solution is to go the LLC route instead of the incorporated route. [ QUOTE ] 4) What are the downfalls of a corporation? Is there a specific amount of revenue one should have to start one? [/ QUOTE ] Formal paperwork and mandatory meetings that you have to keep minutes of. Here is a good link that might answer your question.
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#4
12-14-2006, 02:50 PM
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Re: Going Incorporated
So if I did go the LLC route could I reinvest profits? Can you start an LLC as a poker player? I read something about a famous person getting sued but all his assets were under the corporation, so it was if he didn't own anything.
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#6
12-15-2006, 08:39 PM
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Re: Going Incorporated
[ QUOTE ]
I know a lot of poker players who are filing as C corps and S corps and lccs by reccomnation of their cpas. [/ QUOTE ] I'm certain that these CPAs don't know what they're talking about or they aren't specialist in filing gambling taxes.
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#8
12-15-2006, 10:46 PM
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Re: Going Incorporated
[ QUOTE ]
You can incorporate. Stock traders incorporate, why can't poker players? [/ QUOTE ] Because stock traders do not have a law that prevents banks/credit cards from funding their brokerage accounts? On a serious note, how can you compare? One reason is a poker player does not offer a service to anyone, at least stock traders can. Now that doesn't mean poker players can't incorporated. But if poker players incorporate, they will have to file as "gambling corporations," which has a whole different set of tax laws that most CPAs don't even know exist. [ QUOTE ] Please state the pertinent tax court ruling that shows a person that plays poker can not incorporate. [/ QUOTE ] Yes, the IRS loves this kind of defense.
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#9
12-15-2006, 11:38 PM
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Re: Going Incorporated
[ QUOTE ]
[ QUOTE ] You can incorporate. Stock traders incorporate, why can't poker players? [/ QUOTE ] Because stock traders do not have a law that prevents banks/credit cards from funding their brokerage accounts? On a serious note, how can you compare? One reason is a poker player does not offer a service to anyone, at least stock traders can. Now that doesn't mean poker players can't incorporated. But if poker players incorporate, they will have to file as "gambling corporations," which has a whole different set of tax laws that most CPAs don't even know exist. [ QUOTE ] Please state the pertinent tax court ruling that shows a person that plays poker can not incorporate. [/ QUOTE ] Yes, the IRS loves this kind of defense. [/ QUOTE ] could a cpa for 10 years in vegas really be dumb enough not to know this?
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#10
12-16-2006, 12:18 AM
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Re: Going Incorporated
[ QUOTE ]
could a cpa for 10 years in vegas really be dumb enough not to know this? [/ QUOTE ] I don't know. I have to talk to the guy to get a feel if he knows what he's talking about or not. Anyway, I just called the IRS office (Telephone Assistance for Individuals Toll-Free, 1-800-829-1040 for those that are interested) and after two transfers, the worker told me to talk to a tax attorney. For the record, I've only talked to CPAs so if anyone knows a tax attorney, fire away. Maybe Greg Raymer? Lastly, you do not know how much I want me and sources to be wrong since being incorporated is like rakeback times 2.
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