Boss made me 10% owner in S-corp. What are the tax dis/advantages to this.?

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M	Boss made me 10% owner in S-corp. What are the tax dis/advantages to this.?

This is a new company - an S-corp. I also make a regular salary with this company. Am I entitled to the salary as well as 10 percent of the profits at the end of the year?

inthewind99

3eleven's response was very good. distributions are optional so you really need to understand the profitability of the company.

Last thing you want is to get "XXXX" profit that you have to report (from tax form k-1) and not get the distributions to cover.

Frankly, having 10% of a private company could be for look more than any financial gain. I would talk with a CPA before accepting it. You may very will just want more compensation.

As a 10% owner, you can't make any decisions because you are not majority and it is unlikely you could even sell you 10% interest down the line for this same reason.

This is a great way to retain an employee as they feel like they have ownership but whether it actually has value to you or will is another story.

3eleven

Most reasonable majority owners will issue a distribution at year end to take care of the additional tax liability you may incur. I would ask if I were you.

Way to go, though!

patrickmcc55

Yes. An S Corp distributes all of its annual profits to the owners at year end. It is taxed at your normal rate.
There are no tax disadvantages to being made a partial owner of an S-corporation.
The only disandvantage is a legal one. As a minority owner, you are now a bonefide officer of the company. Therefore, you can be held legally responsible for any malfeascence of the Corporation, both criminal and liability.

lingt69

distribution of profits depend on the corporate bylaws... in an s-corp, you may be required to put back a certain % of your distributions into the company. but of the distributions that are kept by partners as personal income, then yes you likely are entitled to 10% of the distributions. plus, there is no double taxation on the distributions (no tax at the corporate level for the profits distributed).

of course, you're susceptible to personal liability if the corporate veil were pierced, and all that other good stuff that goes into corporate ownership.

good luck!

Edit(s):

Patrick: being a shareholder does not automatically equate to being an officer.

matzaballboy

how much sex was involved in this 10 %

jay-z

you will have to pay more taxes according to the net profit you earn from S-corp. if S-corp makes less money, you pay less taxes for that part. if S-corp makes more money, you'll have to pay more taxes too.

chuck

10% of the profit or loses are reported on your tax return. No disadvantages to that.

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