Discussion:By incoporating, can I rcv. income that never shows up as personal?
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Discussion Forum Index --> Accounting Questions --> By incoporating, can I rcv. income that never shows up as personal?
| 6 August 2007 | |
| I am on total disability and receive disability insurance and SSDI. I can't hold a normal job but I have been able to pen a few novels when I'm able to sit at my desk. Making money from writing novels is difficult and there is no way to gauge the proceeds. I could write the next great American novel and it only sells 2,000 copies and net's me, say, $4,000. On the other hand, I could have a runaway bestseller and make $1,000,000. If I made the big bucks, I wouldn't be worried. I could live without my disability checks. If I only managed meager sales and reported the income, there's a strong possibility that my disability checks would be reduced or cancelled entirely. Given the nature of the publishing industry, this could be disastrous for me. I could have a nice little book that netted me 10-20k and never make another dime off my writing.
So, if I incorporate (C-type I think) as an entertainment service and direct all of my writing proceeds to the corporation-and pay my taxes-would that ever show up as personal income. I wouldn't take any dividends and only use the proceeds to buy stuff that was business related. Thanks for any ideas. I'm not trying to scam anyone, I just don't want to end up homeless because I wrote one pithy little novel. | |
| 9 August 2007 | |
| Hi
You do understand about the Corporate tax rate is flat right? You are on the right track however, if you were to make millions on one book and not distribute dividends, there may be a tax penalty on the undistributed capital unless you can justify the need of it. | |
| 9 August 2007 | |
| Wouldn't it be difficult to get cash out of a C-corp for personal use without it appearing on your individual tax return in some way? (Salary to a W2, dividends to Sch. B, etc.) Shareholder loans in excess of $10,000 would require imputed interest. Also, the officers of a C-corp are reported on the 1120 sch. E. It seems risky to me. Just bouncing ideas around... | |
| 31 August 2007 | |
| TicklePig,
The short answer is "no", but it seems to me that incorporating could be to your advantage. If you make less than the SSDI cut-off limit, you can take the money in salary or dividends. This may reduce your benefits, but not eliminate them. If you make slightly more, the corporation can retain some of the funds so you don't get over-paid. There is also the ability to carry forward losses to offset future income. And, as you said, if you make millions you don't have to worry about losing the disability checks. Remember that there are also expenses involved in setting up and managing the corp (legal, accounting, etc.) which may limit the advantages. You need to talk to a professional to see what it would take to get you started. Good luck, I hope you write a best-seller! | |
Bottom Line (talk|edits) said: | 1 September 2007 |
| Talk with your attorney about owning a corp. I've got a client that wants to start a business with his brother. The client is in the process of applying for disability and his attorney told him not to have an ownership interest in an S-corp or LLC because it might mess up his disability hearing. (This is in Florida) | |
| 3 September 2007 | |
| There are two issues here, one is Medicare, which you qualify for after a period of time under Social Security disability, and the other one is Medicaid. Medicare/SSDI depend on income and the ability to perform any work in the economy. BUT Medicaid (if you get Medicaid) depends on what YOU OWN. I think it's now up to 7k in total assets you can own, but could be higher. So any business interest you have would have to be listed. Now, there are ways to manipulate this (one is using a trust that is settled [funded say with 12k] by one of your relatives to hold an LLC interest or any future business interest you may have)[e.g. there is not market for the LLC so value is substantially lower than it's checking acct. balance], but they require some work and expense to make sure they are ethically and legally done. | |
Bottom Line (talk|edits) said: | 3 September 2007 |
| I hate to tell you that you need to spend money to get a better answer, but you really do. Speak with an attorney in your state that specializes in disability. This situation depends upon your specific situation and can be influenced by state law. | |
| 3 September 2007 | |
| For SSI, the income is determined to be EARNED INCOME....so if you have an investment and are not having earned income, then this is not included in the monthly amounts. But also, if it is actually earned, then SSI is based on MONTHLY earned income....it is not based on annual.
There is a story in the SSI office of a person on a disability who won the lottery....the month of the winnings put them over the amount, but they could certainly could qualify in other months..... | |
| 3 September 2007 | |
| Yes, as strange as this may sound, you may want to go to what's called an "Elder Law" attorney, as they often deal with all these benefit programs. One of the most difficult parts of being disabled is when you recover to the extent that you want to do work, but cannot afford the risk of coming fully off your benefits. Good luck. | |
