Hi, a newbie dentist here, I’m going to set up myself as an S-Corp (no LLC in California), my attorney wanted to know if I will be paying myself via W2. I guess I need to know this info to set up an EIN. Can you advise?
Thanks a ton!
Jason Wood (www.DentalAttorneys.com)
Before answering all of the other questions your post raises…
1. Why are you setting up an S-Corp? I.E. What is the purpose?
Right now I’m being paid on a combination of 1099s and W2s, I’m single, no children, so no real deductions. I’m setting up S-Corp so it would be a bit easier for me to run deductions and expenses.
1. How much are you making? If you aren’t making enough, the deductions will not equal the yearly maintenance costs associated with the corporation.
2. What are your short/medium term goals as a dentist? If it is to own or do a start up in the next 2 years, then starting a corporation now is probably not in your best interest since you should abandon your “associate corporation” when you go to purchase/start up a new practice because you do not want a liability connection between your new practice and your old associate life.
Tim Lott (http://www.dentalcpas.com/)
While Jason is guiding you through all the proper questions I’ll comment on your specific questions for the benefit of others that might be considering an S-Corp:
“My attorney wanted to know if I will be paying myself via W2.”
How else does an employee of a corporation get paid for rendering services? The answer is YES, even if it’s a nominal wage as the corporation will probably have employee business expenses so it’s usually a good idea to show wages to acknowledge you ARE an employee.
I guess I need to know this info to set up an EIN. Can anyone advise?
S-Corp is going to have an EIN regardless of if it has employees or not.
Right now I’m being paid on a combination of 1099s and W2s. I’m single, no children, and so no real deductions. I’m setting up S-Corp so it would be a bit easier for me to run deductions and expenses.
Why will an S-Corp make it “easier” to run deductions? What deductions does an S-Corp allow that a Sole Proprietorship doesn’t?
Thank you so much for the info offered, I looked at my situation a bit more and I think I’d like to get situated thus:
My primary income is coming from a practice where I’m a partner at. This practice is set up as a C-Corp. I’d like to be able to help my partner avoid paying the payroll taxes by having my compensation be a straight forward corp-to-corp expense. Would I then be able to take that lump compensation, then disperse to myself (the individual – my corporation has no other employees, no other shareholders) a W2?
This bit of advice:
However, I have also been advised to NOT give myself a W2 (so I don’t have to pay the payroll taxes on that) but to simply disperse to myself as dividends and then pay the 1040 at the end of the year.
Should generate this response:
“but the answers I’ve received have been less than satisfactory”
Beyond that your posts are quite confusing to me….bottom line is:
If you create an S-Corp to contract with a practice to perform dentistry and if that S-Corp is relying on a dentist to perform the dentistry (After all, an S-Corp can’t perform dentistry….its employees do) that employee would require a W-2 as an employee.