How do I Put money into my Corporation from my personal payroll check?

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How do I Put money into my Corporation from my personal payroll check?

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Anilao

posts: 23

Apr 19, 2008 8:10 PM ET Quote Report Abuse

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Hello,

I am trying to set up my business corporation very soon, and plan on opening a checking account solely for my business.

I would like to fund my corporation from the lousy money I make from my dead end job. The Idea is to have my employer change the person they pay and make my check payable to my corporation as a direct deposit.

Here is several things that is important to know.

I live in California, and my corporation would be held as a Wyoming Corporation.

I am doing this because of tax benefits in Wyoming and also because the business would be an internet business that would be run in my house, and I would not be actually doing any physical business in the State of California.

Please give me any suggestions on how I can fund my business without double taxation as in I get taxed from my pay check, and when I deposit money into my corporation, my corporation gets taxed by the IRS.

I really do appreciate your response,

Thank you,

Richard Anilao

Innovator7

posts: 302

Apr 20, 2008 1:32 AM ET Quote Report Abuse

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You`re making it too complicated, it seems.

If your corporation is doing well, why would you keep putting more money into it?

Why would you put money into your corp. only to take it out via payroll to your self? Just pay yourself nothing for now and build the business to say a billion dollars, then retire.

-------------------------

Go Green and put more money onto your bottom line with award-winning LED-based light bulbs PearlLED. If you manage a good sized store/business and want to boost the bottom line, call us!

robertj

posts: 1458

Apr 20, 2008 11:01 AM ET Quote Report Abuse

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Richard,

You need to get some advice from a tax professional.

Since you are an employee - the company you work for must issue your check to you as the employee.
Since you live in California, any profits or wages you receive from your "corporation" will be subject to tax by California.
The corporation will own the minimum Corporation fee ($800) plus tax on income generated in California.
Money deposited by you into the Corporation (if done properly) is not taxed by either State or Federal Government. Only profits are subject to income tax.

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

Anilao

posts: 23

Apr 20, 2008 3:58 PM ET Quote Report Abuse

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Thanks for your help Innovator7 & Robertj.

Actually, My Corporation has not yet been formed at this time.

And RobertJ, what would be a proper way to deposit money into a corporation without any taxation? Only startup capital will be deposited onto my account, and my income if any would be generated online via online advertisement.

With my company being an online business, will I still have to register it in the State of California even though I don`t plan on doing any Physical Business in this state? I want my corporation to be registered in the State of Wyoming for tax purposes (Tax Avoidance and NOT Tax Evasion).

Also I am aware of California being the most expensive State to incorporate at a rate of $800 per year, and I am not financially ready to shell out that much each year especially within 30 days of incorporation. But what do you think I should do?

My actual plan is to operate out of my home in California to do the web development, customer support via Skype online, and maintenance. I plan on having a registered agent to open a bank account for me in Wyoming (Maybe Bank of America Comerica or Wells Fargo) and deposit my pay check onto my account from California via California Branch or Via Check mail deposit.

Actually, I want to pour all my lousy employment check onto my corporation to start and grow my business, I don`t actually want to take any money out from the corporation at all since I can use my corporation as me doing business.

If my employer can`t write the check out to my corporation, and I must pay regular tax on the money I earn, I want to make sure that when I deposit that lousy check onto my corporation, it will not be taxed again as a profit since it has already been taxed from my income tax.

RobertJ, You actually had my question correct. I wanted to know how I can deposit money onto my corporation without being taxed.

But thank you to both Innovator7 and RobertJ for responding to my question.

robertj

posts: 1458

Apr 20, 2008 4:13 PM ET Quote Report Abuse

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Generally, the "after tax"money you put into your company is either "paid in capital" (an investment) or a loan to the company.

Anilao

posts: 23

Apr 20, 2008 5:49 PM ET Quote Report Abuse

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RobertJ,

Thanks again for a response.

If I put "After Tax" Money into a corporation, and turn into a "Paid in Capital" (an investment), will my corporation be taxed for the amount I put into the company? I do not really want to make a loan out to my corporation so "Paid in Capital" method sounds like the best way for me to fund the corporation for start up money. But is this the best way to fund a business in a tax perspective?

Now as for the corporation, where do you think I should register my business? In Wyoming and run the business from my California home, but not do any Physical Business in the state?

or in my home state?

Thanks again

RobertJ

gcompc

posts: 5

Apr 27, 2008 10:52 AM ET Quote Report Abuse

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Anilao,

I`m in Colorado and I incorporated as an LLC husband and wife team. Before I stareted up I just took extra money from my paycheck and used it as part of startup costs. I`m still working full time and my company is in the almost making money mode until I quit my full time job in less than 2 years. I constantly take money from ny paycheck and add to my company as owner`s equity. I don`t get taxed for it, I only get taxed on profit brought in and I don`t have to worry about that for now sad to say. Another question why would you have to pay $800 a year to incorporate? Your thoughts sound complicated, I registered in Colorado where I live and do business on the internet nationwide. You`ll file your taxes in the state you live in as income anyway. Sounds like a simple LLC, would be the way to go. You can do that yourself or am I just missing hte whole point as usual?

Anilao

posts: 23

Apr 27, 2008 12:40 PM ET Quote Report Abuse

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Anilao,

Hey Thanks for your response.

That $800 per year to incorporate is California`s Franchise Tax Fee. You pay that weather you have an LLC a C/S- Corporation.

First you pay the filing fee of about $100 or so, then in 30 days, you must shell out the $800 as the Franchise Tax.

Now I hear that Nevada & Wyoming don`t have Franchise tax, nor income Tax, and that is why I am so interesed in incorporating in one of those two states.

However, you answer really gave me what I needed to know. So, to see if I understood you correctly, hear is what I think I heard you say.

It is ok to take extra money from your paycheck to deposit right onto your company`s Bank Account as Owner`s Equity, and you don`t get taxed on that money until the company makes a profit.

As for filing taxes, I think I would need to file two returns, one for me and one for my corporation? But What if I live in a separate state from my corporation? would I have to file in two states? The State I live in and the State my Corporation has its Jurisdiction?

Innovator7

posts: 302

Apr 27, 2008 12:53 PM ET Quote Report Abuse

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That $800 per year to incorporate is California`s Franchise Tax Fee. You pay that weather you have an LLC a C/S- Corporation.

First you pay the filing fee of about $100 or so, then in 30 days, you must shell out the $800 as the Franchise Tax.

You got that right. You pay $800 for Californian weather. That`s cheap, because Calif has great weather, allowing you to work hard all year round.

I incorporate in Nevada but my corp. is registered to do business in CA. I plan to get Nevada residency some day.

-------------------------

Go Green and put more money onto your bottom line with award-winning LED-based light bulbs PearlLED. If you manage a good sized store/business and want to boost the bottom line, call us!

robertj

posts: 1458

Apr 27, 2008 1:40 PM ET Quote Report Abuse

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[

Hey Thanks for your response.

That $800 per year to incorporate is California`s Franchise Tax Fee. You pay that weather you have an LLC a C/S- Corporation.

First you pay the filing fee of about $100 or so, then in 30 days, you must shell out the $800 as the Franchise Tax.

Now I hear that Nevada & Wyoming don`t have Franchise tax, nor income Tax, and that is why I am so interested in incorporating in one of those two states.

However, you answer really gave me what I needed to know. So, to see if I understood you correctly, hear is what I think I heard you say.

It is ok to take extra money from your paycheck to deposit right onto your company`s Bank Account as Owner`s Equity, and you don`t get taxed on that money until the company makes a profit.

You really need to talk with an attorney - but here are some tips

1. You can`t just deposit personal money into your corporation account. That`s defined as "co-mingling of funds". You want to AVOID doing that.

2. Income taxes are based upon income - so the money you invest (owners equity) or loan to a corporation is not taxable to the company. If you take money from the corporation and don` t do it right - that can be taxable.

3. Money you receive by working on/for the company is earnings - taxable in in California because you live there.

4. California will take the position that since the owner(s) of the business reside in California; the company is doing business in California and will expect taxes.

5. Every State charges something to create a business entity in their State and they all require an annual "fee" to maintain it. It`s true that California`s $800 is the highest base fee. (Nevada is about $200)

If you don`t want to pay California income taxes - you need to move out of California.

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