Note: Running most Fridays in FromGregsHead.com, is a continuing series of tips brought to you by Greg Price. These run Saturday mornings during the BusinessMaker’s Radio Show on KPRC 950AM. Audio files can be found on the Entrepreneur’s Playbook page of the PKF Texas website.
Last week we talked about the pros and cons of C Corporations. This week we will continue with some additional information. To form and maintain a C corporation, you must file articles of incorporation with the secretary of the state in the jurisdiction of the organization, adopt bylaws, elect a board of directors, hold organizational meetings, and keep minutes.
To minimize the amount of income that is taxed twice, closely held corporations often try to pay out most or all of their earnings in a tax-deductible way such as salaries or rent — assuming the amounts are reasonable. The IRS and taxpayers frequently disagree on the definition of "reasonable"
Due to complexities in every situation, please be sure to contact your tax advisor when making entity selection.