How to Protect Your S Corporation

In order to protect your S Corporation, you need the corporation to look, feel and act like a corporation, and you need a salary that will stand up to the IRS as a reasonable salary.

For the corporation to stand up to scrutiny, you want the corporation as the entity to authorize the conduct of business and the employer of the agent (you) to make the sales.

First, establish the corporation as a bona fide legal entity then have the corporation execute contracts, receive checks in its name and direct your activities(have your “corporate self” talk to your “employee self” in writing).

Checks must be payable to your Corporate Name.  No Exceptions are allowed.  The law says that “gross income” includes all income, from whatever source derived, including compensation for services, fees and commissions.¹ If you as an individual receive Form 1099-Misc, then the government believes you earned the income.  This pierces the corporate veil.

If you would like to learn more about this tax strategy, please call Susan at 847.895.9880.

¹ IRC Section 61(a)