California corp.

My graduate law class just covered legal entities. By luck my partner
and I had registered our Mooney in a Mutual Benefit Corp (C-corp). Had
we not, the attorney teaching the class said we would probably be
considered "Partners" under the eyes of the law. If we had just put
the plane in our names we would have been "Partners". As near as I can
tell "Partners" is the laws punishment for not doing anything else,
"Partners" happens automatically by default. "Partners" is the worse
case scenario because it comes with unlimited liability. If your
partner is driving to the airport and hits a dog, the dog's owner can
sue you and take your house.
In some states LLCs are a good way to establish. However, in
California LLCs have a minimum state tax of $800/year. Some people
tried to get smart and create their LLCs in other states. Well,
California now has a business fee for out of state LLCs of, guess
what, $800/year. Its kind of like sales tax. They can't charge you
8% for a plane you bought out of state, but they can charge you an 8%
"use tax" when you get it here (although there are some ways to avoid
that).
In anycase, I guess we got dumb lucky when we decided to create a
corporation. The only downside is that we have to have an annual
meeting, save meeting minutes, have officers, and report taxes
(although the corp's taxes are zero).

-Robert, living and learning

I chose to go with a LLC and deal with the $800 excise tax every year. It's
really silly that they charge that much for the "opportunity to conduct
business within California." However, the LLC provides me with protection
and allows me not to have to deal with maintaining two entities for tax
purposes (my LLC is where I make my income BTW). The $800 is also
deductable, so depending on your tax bracket you should recoup $200 or so.

The California C-Corp has a minimum tax of $800, so any year that it doesn't
bring in income, you still owe $800. Many folks get burned by that by not
properlyl shutting down the C-Corp after they are done with it and the State
merilly charges $800 and fees and penalties. Then someone is shocked to see
a $5000 bill from the State a few years down the road.

r.

"Robert M. Gary" wrote in message
om...
My graduate law class just covered legal entities. By luck my partner
and I had registered our Mooney in a Mutual Benefit Corp (C-corp). Had
we not, the attorney teaching the class said we would probably be
considered "Partners" under the eyes of the law. If we had just put
the plane in our names we would have been "Partners". As near as I can
tell "Partners" is the laws punishment for not doing anything else,
"Partners" happens automatically by default. "Partners" is the worse
case scenario because it comes with unlimited liability. If your
partner is driving to the airport and hits a dog, the dog's owner can
sue you and take your house.
In some states LLCs are a good way to establish. However, in
California LLCs have a minimum state tax of $800/year. Some people
tried to get smart and create their LLCs in other states. Well,
California now has a business fee for out of state LLCs of, guess
what, $800/year. Its kind of like sales tax. They can't charge you
8% for a plane you bought out of state, but they can charge you an 8%
"use tax" when you get it here (although there are some ways to avoid
that).
In anycase, I guess we got dumb lucky when we decided to create a
corporation. The only downside is that we have to have an annual
meeting, save meeting minutes, have officers, and report taxes
(although the corp's taxes are zero).

-Robert, living and learning

The $800 is also
deductable, so depending on your tax bracket you should recoup $200 or so.

Er, you're not deducting a business expense on your personal tax
return, are you?



all the best -- Dan Ford
email: (requires authentication)

see the Warbird's Forum at www.warbirdforum.com
and the Piper Cub Forum at www.pipercubforum.com

Absolutely.

The $800 goes directly on Schedule C of my personal tax return. My LLC is
treated as a sole-proprietership by California because I'm the only member.
So, I get the legal protection of a C-Corp and the paperwork ease of a
sole-proprietership.

r.

"Cub Driver" wrote in message
...

The $800 is also
deductable, so depending on your tax bracket you should recoup $200 or
so.

Er, you're not deducting a business expense on your personal tax
return, are you?



all the best -- Dan Ford
email: (requires authentication)

see the Warbird's Forum at www.warbirdforum.com
and the Piper Cub Forum at www.pipercubforum.com

"Rob Thomas" wrote in message
...
Absolutely.

The $800 goes directly on Schedule C of my personal tax return. My LLC is
treated as a sole-proprietership by California because I'm the only
member.
So, I get the legal protection of a C-Corp and the paperwork ease of a
sole-proprietership.

r.


How does that work exactly? I'm not familiar with LLC's, except
that from what I remember you can opt to have them treated as
either partnerships or corporations for tax purposes.

I don't understand how you can pass the $800 back to your individual
return unless you're treated as an S-corp for tax purposes.

Either his sole proprietorship owns the LLC or the LLC *is* the sole
proprietorship. In the latter case, I'm not sure why he isn't filing an
1120 return.

Mike
MU-2

"Tony Cox" wrote in message
hlink.net...
"Rob Thomas" wrote in message
...
Absolutely.

The $800 goes directly on Schedule C of my personal tax return. My LLC
is
treated as a sole-proprietership by California because I'm the only
member.
So, I get the legal protection of a C-Corp and the paperwork ease of a
sole-proprietership.

r.


How does that work exactly? I'm not familiar with LLC's, except
that from what I remember you can opt to have them treated as
either partnerships or corporations for tax purposes.

I don't understand how you can pass the $800 back to your individual
return unless you're treated as an S-corp for tax purposes.

Single entity LLC's (one director, me) are treated *exactly* like sole
proprietorships by the IRS. However, they are still afforded the same legal
protections as a C-Corporation. It *used* to be that LLC's were treated as
partnerships, or the LLC could elect to be treated as a C-Corp for tax
purposes. Those regulations changed a few years ago.

I file a 1040, along with a Schedule C (profit/loss from business) just as
any other sole proprietorship would.

Just a side note, all of my income is produced through my LLC, so it's not
just a holding company for an aircraft. I know some people set them up that
way, but just wanted to point out that mine is not setup that way.

r.

"Tony Cox" wrote in message
hlink.net...
"Rob Thomas" wrote in message
...
Absolutely.

The $800 goes directly on Schedule C of my personal tax return. My LLC
is
treated as a sole-proprietership by California because I'm the only
member.
So, I get the legal protection of a C-Corp and the paperwork ease of a
sole-proprietership.

r.


How does that work exactly? I'm not familiar with LLC's, except
that from what I remember you can opt to have them treated as
either partnerships or corporations for tax purposes.

I don't understand how you can pass the $800 back to your individual
return unless you're treated as an S-corp for tax purposes.

"Rob Thomas" wrote in message .. .
I chose to go with a LLC and deal with the $800 excise tax every year. It's
really silly that they charge that much for the "opportunity to conduct
business within California." However, the LLC provides me with protection
and allows me not to have to deal with maintaining two entities for tax
purposes (my LLC is where I make my income BTW). The $800 is also
deductable, so depending on your tax bracket you should recoup $200 or so.

The California C-Corp has a minimum tax of $800, so any year that it doesn't
bring in income, you still owe $800. Many folks get burned by that by not
properlyl shutting down the C-Corp after they are done with it and the State
merilly charges $800 and fees and penalties. Then someone is shocked to see
a $5000 bill from the State a few years down the road.

That's what I like about the Mutual Benefit Corp. You're already set
up as non-profit the moment your articles are approved.

"Robert M. Gary" wrote in message
m...
"Rob Thomas" wrote in message
.. .
I chose to go with a LLC and deal with the $800 excise tax every year.
It's
really silly that they charge that much for the "opportunity to conduct
business within California." However, the LLC provides me with
protection
and allows me not to have to deal with maintaining two entities for tax
purposes (my LLC is where I make my income BTW). The $800 is also
deductable, so depending on your tax bracket you should recoup $200 or
so.

The California C-Corp has a minimum tax of $800, so any year that it
doesn't
bring in income, you still owe $800. Many folks get burned by that by
not
properlyl shutting down the C-Corp after they are done with it and the
State
merilly charges $800 and fees and penalties. Then someone is shocked to
see
a $5000 bill from the State a few years down the road.

That's what I like about the Mutual Benefit Corp. You're already set
up as non-profit the moment your articles are approved.

Wrong!

As a former president of the board of a nonprofit corporation in
California I am very familiar with the requirements for a nonprofit
corporation. Go to the IRS website and research the requirements for a
federal 501(c)(3) determination before you go any further.
The state of California does NOT determine the nonprofit status of a
corporation. The IRS issues a letter of determination. The Attorney General
and Franchise Tax Board, providing some other requirements are met, rely on
the IRS determination.
Nonprofit status is NOT automatic. There is significant paperwork to
submit for to the feds to establish the status.
The fact that a corporation does not show a profit does NOT make it a
nonprofit corporation.
The fact that a nonprofit corporation increases its net worth year after
year does not invalidate its nonprofit status.

"Casey Wilson" wrote in message . ..
"Robert M. Gary" wrote in message
m...
"Rob Thomas" wrote in message
.. .
I chose to go with a LLC and deal with the $800 excise tax every year.
It's
really silly that they charge that much for the "opportunity to conduct
business within California." However, the LLC provides me with
protection
and allows me not to have to deal with maintaining two entities for tax
purposes (my LLC is where I make my income BTW). The $800 is also
deductable, so depending on your tax bracket you should recoup $200 or
so.

The California C-Corp has a minimum tax of $800, so any year that it
doesn't
bring in income, you still owe $800. Many folks get burned by that by
not
properlyl shutting down the C-Corp after they are done with it and the
State
merilly charges $800 and fees and penalties. Then someone is shocked to
see
a $5000 bill from the State a few years down the road.

That's what I like about the Mutual Benefit Corp. You're already set
up as non-profit the moment your articles are approved.

Wrong!

As a former president of the board of a nonprofit corporation in
California I am very familiar with the requirements for a nonprofit
corporation. Go to the IRS website and research the requirements for a
federal 501(c)(3) determination before you go any further.

IRS?? IRS is federal.

The state of California does NOT determine the nonprofit status of a
corporation. The IRS issues a letter of determination. The Attorney General
and Franchise Tax Board, providing some other requirements are met, rely on
the IRS determination.

Incorrect. The California Franchise Tax Board does. The form is FTB
3500. There is no requirement that you file anything with the IRS
before filing out this form (nor does the form even ask about Federal
Status). In fact the state is VERY explicit that state non-profit
status is determined independent of feder. You fill this out when you
incorporate.


Nonprofit status is NOT automatic. There is significant paperwork to
submit for to the feds to establish the status.
The fact that a corporation does not show a profit does NOT make it a
nonprofit corporation.

But since the fed's don't have a minimum tax, no one cares about
federal status. Unless of course you have a company that is paying
saleries, etc.