Can I have two DBA's run by two separate people under one S Corp?

Discussion in 'Growing and Managing a Business' started by bhop, Jun 29, 2011.

  1. bhop

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    Jun 29, 2011
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    I have an S Corp and do all of my freelance design work through a DBA. My wife is a stunt woman, and has been getting more work lately as an independent contractor. I want to see if it is legal/smart to add her as a shareholder to my S Corp, and get her a DBA to do her stunt work through. So we would have the S Corp together, and I would do design under my DBA, and she would do her stunt work under her DBA. The money earned would go into our business checking and savings. I have two checking and two savings account under my S Corp, so we would keep all earnings separate, and pay ourselves from there.

    Any idea if this is smart or legal? I am just trying to avoid having to pay for a completely separate corporation for her. Plus, I would like to keep everything semi-together, because we file jointly.

    Any advise would be appreciated. Thanks! :D

  2. Fergal

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    Nov 18, 2007
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    Welcome to Business Advice Forum BHop, thanks for joining and posting your business questions.

    What state are the businesses based in?
  3. ArcSine

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    Jun 2, 2010
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    Operating both activities under a single entity shouldn't be any problem. Corporations aren't restricted to the conduct of single activities, and being an "S" corp doesn't change that fact.

    Be sure that if you pay dividends on the stock, you pay the same amount per each share. Say, for example, that you are holding 100 shares and your wife is the owner of 80 shares. You see that there is an surplus of $1,000 in the ol' corporate kitty which you decide to distribute as a shareholder dividend. This 1G must be distributed as $555.56 and $444.44, respectively, so that the distribution is proportional to the share holdings. (Sure, you can---and probably will ;)---redistribute the loot later when you get home, but officially you've gotta respect the formalities.)

    This is because an S corp will lose its S election if it has more than a single class of stock outstanding. This in turn means that all outstanding shares must receive the same per-share dividends, if divvys are paid at all.

    Salary payments do not carry the same equality requirement, and so the adjustment to reflect differences in your and your wife's individual earnings will be done through the salary checks. In other words, you can pay out salaries and/or bonuses to yourself and to your wife in amounts that reflect how much she's brought in through her business, and how much you have brought in yourself.

    Dividend payments would only be an issue if you don't pay out all of the net profits in the form of salaries.

    That's broad-brush, but your tax advisor will advise you of the details. Cheers!
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