Corp-to-Corp computer consulting in CA- what's the deal?
September 29, 2011 1:05 PM Subscribe
Corp-to-Corp computer consulting in CA- what's the deal?
I have worked as a contractor/consultant for a while doing web development in CA, usually on a W2. For my next job I am considering switching to corp-to-corp and I have a few questions:
1) How easily/quickly can I set this up? A recruiter once told me "there's a website where you can do it in a few minutes" - is this true and if so, what is this website?
2) What are the tax implications. I'm under the impression I receive a check for the full amount I'm billing, and deal with taxes later, like a 1099 situation- is this true? Do I just pay a big boatload of taxes in April or am I forced to pay quarterly. I've often heard about quarterly tax payments but was not clear on how mandatory it was.
3) Which state? I have heard that CA has a minimum tax of $800 on corps, which might be bad in a year where I don't do any consulting, which is possible. Should I incorporate in DE or some other state?
4) Bonus: Can I use this corp. for other purposes not related to web dev? For example, I also produce movies, and it would be nice to do so under the guise of a corp. in case of legal tangles. Can it just be Drjimmy11, Inc. and an umbrella for any kind of business I engage in?
I know you are not my lawyer or accountant- I will consult one or both as needed. Just looking for basic info.
Thanks!!
I have worked as a contractor/consultant for a while doing web development in CA, usually on a W2. For my next job I am considering switching to corp-to-corp and I have a few questions:
1) How easily/quickly can I set this up? A recruiter once told me "there's a website where you can do it in a few minutes" - is this true and if so, what is this website?
2) What are the tax implications. I'm under the impression I receive a check for the full amount I'm billing, and deal with taxes later, like a 1099 situation- is this true? Do I just pay a big boatload of taxes in April or am I forced to pay quarterly. I've often heard about quarterly tax payments but was not clear on how mandatory it was.
3) Which state? I have heard that CA has a minimum tax of $800 on corps, which might be bad in a year where I don't do any consulting, which is possible. Should I incorporate in DE or some other state?
4) Bonus: Can I use this corp. for other purposes not related to web dev? For example, I also produce movies, and it would be nice to do so under the guise of a corp. in case of legal tangles. Can it just be Drjimmy11, Inc. and an umbrella for any kind of business I engage in?
I know you are not my lawyer or accountant- I will consult one or both as needed. Just looking for basic info.
Thanks!!
Talk to an accountant. I am not one. I am, however, a former consultant, and I still have a one-man Nevada corporation that I used to do business-to-business consulting under. I am in California (now), but I started and ran the NV corp when I was living elsewhere. All else being equal, it is usually easier to start and run a corporation that is incorporated in the same state where you live and do business.
Nolo Press, and nolo.com are usually a good resource, too... but not a replacement for an accountant and/or lawyer.
1. Setting up a corporation involves little more than paperwork. It is not difficult, but you need to understand the implications of doing it. From the moment your corp begins "doing business", you will need to maintain certain records, and make certain elections. But initially forming it? Usually a one or two page boilerplate document, filed with the Secretary of State... followed by a couple of documents filed with the IRS and your city clerk's office.
2. The taxes vary by state and corporate status (C-Corp, S-Corp, or certain types of LLCs in certain states). In my case, mine was an S-Corp, so the Corp's income was passed through to me, and appeared on my 1040 as if it were my own income. The details of this are a little foggy to me, because my accountant took care of it. The gist though is... My corp received a certain amount of money from my clients, paid most of it to me as a salary, withheld income taxes for me and paid payroll taxes on my salary, used some for business expenses and equipment, and kept the rest in a rainy-day fund. I (the individual) received a W2, was taxed on my salary, and was also taxed on the profit that landed in the rainy-day fund. I believe the corp may have paid me a dividend one year as well.
3. California charges that $800 regardless of what state you're incorporated in. If you're an out of state corporation or LLC doing business in California, you have to register as a "foreign" corp, and are subject to our taxes here. Look... You. Live. In. California. Do not attempt to dodge legitimate California or LA taxes until you physically move out of state. That is not what incorporating in another state is for.
4. Your corporation can engage in any legal business that the board of directors and/or management team believes that it should engage in, provided your bylaws don't prohibit it. Since you're forming the corporation and are its only shareholder, you get to write/choose the bylaws.
posted by toxic at 6:50 PM on September 29, 2011 [1 favorite]
Nolo Press, and nolo.com are usually a good resource, too... but not a replacement for an accountant and/or lawyer.
1. Setting up a corporation involves little more than paperwork. It is not difficult, but you need to understand the implications of doing it. From the moment your corp begins "doing business", you will need to maintain certain records, and make certain elections. But initially forming it? Usually a one or two page boilerplate document, filed with the Secretary of State... followed by a couple of documents filed with the IRS and your city clerk's office.
2. The taxes vary by state and corporate status (C-Corp, S-Corp, or certain types of LLCs in certain states). In my case, mine was an S-Corp, so the Corp's income was passed through to me, and appeared on my 1040 as if it were my own income. The details of this are a little foggy to me, because my accountant took care of it. The gist though is... My corp received a certain amount of money from my clients, paid most of it to me as a salary, withheld income taxes for me and paid payroll taxes on my salary, used some for business expenses and equipment, and kept the rest in a rainy-day fund. I (the individual) received a W2, was taxed on my salary, and was also taxed on the profit that landed in the rainy-day fund. I believe the corp may have paid me a dividend one year as well.
3. California charges that $800 regardless of what state you're incorporated in. If you're an out of state corporation or LLC doing business in California, you have to register as a "foreign" corp, and are subject to our taxes here. Look... You. Live. In. California. Do not attempt to dodge legitimate California or LA taxes until you physically move out of state. That is not what incorporating in another state is for.
4. Your corporation can engage in any legal business that the board of directors and/or management team believes that it should engage in, provided your bylaws don't prohibit it. Since you're forming the corporation and are its only shareholder, you get to write/choose the bylaws.
posted by toxic at 6:50 PM on September 29, 2011 [1 favorite]
Being a corporation with an employee living in LA, you would need to get a business license in LA. You would need proof of receipts not apportionable to LA county when preparing the return each year. If you do any telecommuting, this would be a difficult presumption to overcome in audit.
(not tax advice)
posted by politikitty at 7:12 PM on September 29, 2011
(not tax advice)
posted by politikitty at 7:12 PM on September 29, 2011
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posted by drjimmy11 at 1:10 PM on September 29, 2011