Business structure and retirement savings
IC 2004 said:
I am an independent contractor. I will get the check in my name. I would like to start a computer consulting firm. I have the following questions:
1. Under which form of business structure(i.e form of corporation) can I still get the check in my name and show it as income for the corporation?
2. Without starting the business structure(i.e. corporation) can I start a retirement plan to save my taxes. If so can you please guide me?
Thanks in advance.
--IC 2004
Hi IC 2004,
The business structure to use in order to get a check in your own name and
show it as an income for the BUSINESS (not the corporation) is a sole
proprietorship. That means you register a fictious name (aka Doing Business As, aka DBA) and do business under that name. That doesn't create a separate structure, and you and DBA are the same entity as far as taxes are concerned.
The 2 mains drawbacks are:
1) Liability: if you are sued for something your business did, all your personal assets are at risk
2) Self employment taxes: 15+% (social security and medicare taxes).
I recommend an S-Corporation to avoid problem 2 and reduce the risk of #1
Retirement Accounts: There are IRAs designed specifically for the self employed. There is also a newly created retirement saving plan that most
people haven't heard of, and, for those who heard of it, don't think about
using it for retirement savings: a Medical Savings Account. You need to have
an individual or family health plan (with high deductible) to qualify, and you
contribute money to the account on pre-tax basis and it grows tax free, just
like a regular IRA (the extra advantage is that you can use money from that account for medical expenses at any time tax free).
If you happen to be in Maryland, I can set you up with an MSA. E-mail me at
achab@myactv.net .
