Advice needed: What should my next step be for my small business?

Discussion in 'Growing and Managing a Business' started by williamdshook, Dec 29, 2010.

  1. williamdshook

    williamdshook
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    Hi all,

    I started a machine shop in CA about 5 yrs ago and have grown it from $0 to 4mill in sales per year. The company is set up as an S-corp. I am in the process of expanding into an adjacent space to add more production capacity since we are out of space in our current space.

    I have meet with a adviser who have told be I would start a completely new s corporation for the new space because if I were to expand under the same company I would be classified as an C-corp.

    My question is what are the benefits of a C-Corp vs an S-corp? And if you were in my case what would you do? Thanks for your help in advance.
     
  2. ArcSine

    ArcSine
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    Many congrats on your success and continued growth!

    First, neither an expansion nor a relocation, by themselves, will trigger the termination of an S- election. There has to be something more behind the advisor's reasoning.

    There are certain things that will cause a corporation to lose its S-corp status, but the first step is to know exactly which of these pitfalls the advisor has in mind.

    No need to spend time on S- vs. C-corp discussions until you're certain that it's necessary.
     
  3. neha.lemon

    neha.lemon
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    For S corp, there is generally no tax at the corporate level. This means that once a reasonable wage is paid, excess profits can be removed as distributions. If you chose a C corp, dividends will be doubly-taxed.
     

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