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LLC, C-Corp, S-Corp?
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[Rich Rubasch] “Sounds like Fantastic Plastic is raking in the dough…what a problem!”
So true, Rich, it gets so tiresome driving truckloads of cash to the bank twice a day (insert eyeroll here).
I WISH!… sadly we are more like John Candy said in Planes, Trains…, “Still a million dollars short of being a millionaire.”
Sometimes we are out shooting and I will take a look at some of our more well-heeled clients who really do practically have pipelines to the bank (plastic surgeons, cosmetic dentists, etc.), and I’ll think “I should have listened to my dad and become an orthodontist.” Wouldn’t be nearly as much fun, though.
Unfortunately I don’t know of anyone really getting rich in production. We pay the bills, pay the salaries, pay me enough to keep living indoors and funding a few foolishly expensive hobbies… but sadly there is not a whole lot left over after that. I occasionally say that I’m still looking for a rich socialite to keep me (a phrase that doesn’t seem to go over well with the old lady).
We’ve considered buying some real estate a couple of times and building a new studio… but my house is in an old downtown neighborhood in our city and my four minute commute to the office has really ruined me (spoiled, spoiled, I know). Unfortunately downtown commercial real estate is either unavailable or a bazillion bucks a square foot.
Except for that, it’s actually a great idea.
T2
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Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com
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[Rich Rubasch] “With an LLC, in Wisconsin, the corporate client must issue a 1099 at the end of the year.”
See here in Georgia it’s not necessary but many of them do anyway. I try to tell them it’s not required, but we just shred them when they get here.
Walter Biscardi, Jr.
Biscardi Creative Media
HD and SD Production for Broadcast and Independent Productions.STOP STARING AND START GRADING WITH APPLE COLOR Apple Color Training DVD available now!
Read my Blog!
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[David Roth Weiss] “What I want to know is, how is it possible for a CPA to have any part of his brain left over for video related technical issues??? I can assure you, after dealing with the technical issues, I have no part of my brain left over for tax related matters.”
I can say that I have very little (if any) capacity left over after April 15. But video for me is a hobby, so if I sit and stare at After Effects or FCP for a long time because of my brain being fried from doing taxes, it’s OK since I’m only missing my own self-imposed deadline. Video is my creative outlet, since in my chosen profession, if you hear the word “creative” being used, you often end up with Enron-like situations. Not a good thing…
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[walter biscardi] “[Rich Rubasch] “With an LLC, in Wisconsin, the corporate client must issue a 1099 at the end of the year.”
See here in Georgia it’s not necessary but many of them do anyway. I try to tell them it’s not required, but we just shred them when they get here.”
They’re probably issuing 1099s because they are required to issue them under Federal law to any person, including partnerships (which LLCs are taxed as), that they pay $600 or more to in the course of their business. There are penalties if they don’t issue a 1099 and were required to, so they may just issue them to everyone as a CYA move.
Georgia may not require them to send a copy to the state (which is also how California operates), but they still have to send a copy to the IRS. The IRS will forward a copy to the state.
In any event, whether the client issues a 1099 or not doesn’t matter for the recipient of the payment, since you’re required to report the income no matter what. Just make sure that you report at least as much income as is on the 1099s so the IRS doesn’t send a matching notice!
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Hey Steve, thanks for giving all of us vidiots such in depth and well explained tax info. I’m certain we all hope you’re enjoying the COW and learning a lot.
As to 1099’s I have one question. While I take very seriously the requirement to send 1099’s out to my sub-contractors (individuals) every year, I’ve been ignoring and not forwarding to my accountants the one and only incomming 1099 I receive from a client.
They are a not for profit trade organization, so maybe they have to send it. Yes? No?
As an S-corp I assumed that it didn’t matter since we were already declaring the income for all of our clients. So… can I continue to ignore the form I’m sent or does it have some relevance to our corporate taxes?
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[Nick Griffin] “Hey Steve, thanks for giving all of us vidiots such in depth and well explained tax info. I’m certain we all hope you’re enjoying the COW and learning a lot.”
You’re certainly welcome. It’s nice to be able to give a little back when I’ve learned a lot from reading the materials on this site. While I’ve been an After Effects user since college (about 10 years), and consider myself pretty familiar with the software, I quickly realize how much I don’t know when I watch the COW’s AE podcast or watch the tutorials on Andrew Kramer’s site, just to name a few.
[Nick Griffin] “As to 1099’s I have one question. While I take very seriously the requirement to send 1099’s out to my sub-contractors (individuals) every year, I’ve been ignoring and not forwarding to my accountants the one and only incomming 1099 I receive from a client.
They are a not for profit trade organization, so maybe they have to send it. Yes? No?
As an S-corp I assumed that it didn’t matter since we were already declaring the income for all of our clients. So… can I continue to ignore the form I’m sent or does it have some relevance to our corporate taxes?”
Generally, payments to corporations are not required to be put on a 1099. While they’re still subject to the 1099 reporting rules (even though their business is not-for-profit), perhaps they’re not aware that they don’t need to issue a 1099 to you. Your business doesn’t appear to be generating the type of payments that do require a 1099 be sent to a corp.
I’d say you are safe to continue ignoring the 1099 from that one entity. Since your total income is greater than the reported income from that one entity, you won’t be in any danger of the IRS sending a matching notice.
The 1099s are important to other types of entities, such as LLCs, partnerships and sole proprietors. In those cases, you need to report at least the amounts reported on the 1099s, even if the 1099s are incorrect, to avoid a notice from the IRS. The tax return preparer would then report the full amount of the 1099 and then on a separate line would adjust the income to the correct amount. We have some clients that this is necessary for – generally what’s happening is the payer is cutting a check just before year end (so their system counts it for generating a 1099), but our client doesn’t receive the check until after the beginning of the next year, so it’s reportable on our client’s tax return in the year of receipt (cash basis client), not the year the check was written. So, we have to report the 1099 and then back out the payment received in the following year. Many times the adjustment isn’t much, since we’re backing out payment received in year 3 for services performed in year 2, but we have to add in the payment received in year 2 for services performed in year 1.
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And here I thought selecting Codecs was complicated. Thanx!
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With the exception of the difference in tax treatment, a C corporation and S corporation have many of the same attributes.
LLC’s require less formality and paperwork and are more flexible in how owners divide up profits. But, S corporations allow owners to save on employment taxes.
One big difference between S corporations and LLCs is that owners of an LLC can distribute profits in the manner they see fit. For example, assume Adam and Bart own an LLC to which Adam contributed $80,000 in capital and Bart only contributed $20,000. If Bart performs 80% of work the owners could still decide to split the profits 50/50. If these same partners owned an S Corporation, Adam would be required to take 80% of the profit and Bart only 20%.
Here is a comparison chart between C,S and LLC
https://www.clickandinc.com/llc-s-corp-c-corp-chart.asp
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