MsTabbyKats Posted March 20, 2014 Report Share Posted March 20, 2014 And I din't want to ask my CPA because she wii inundate me with links and I 'me not even sure what's happening....and then she will tell me she cannot give me legal advice....blah blah So, I ask here.... My husband and I own an S-Corp....and we got an offer from a buyer. If they pay us $XXX....and we put it into the company bank account....when we withdraw it, is it considered wages...subject to FICA...or ordinary income? Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 20, 2014 Report Share Posted March 20, 2014 And I din't want to ask my CPA because she wii inundate me with links and I 'me not even sure what's happening....and then she will tell me she cannot give me legal advice....blah blah So, I ask here.... My husband and I own an S-Corp....and we got an offer from a buyer. If they pay us $XXX....and we put it into the company bank account....when we withdraw it, is it considered wages...subject to FICA...or ordinary income? NO, DON'T DO IT THAT WAY. If you sell the S Corp, you should close the corp bank account. Put the money in your personal account, and report the sale of the business as a capital sale of an investment property. If, on the other hand, you sell just the business equipment, for example, and plan on keeping the corp going to do something else, then you could put the cash into the corp account, to use in the business. Then if you decide to take some of it out personally, take it as a distribution. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 20, 2014 Author Report Share Posted March 20, 2014 So...if I put it in my personal account and report as capital sale of an investment property , it would be taxed as ordinary income? Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 20, 2014 Report Share Posted March 20, 2014 So...if I put it in my personal account and report as capital sale of an investment property , it would be taxed as ordinary income? No, if it's a sale of a capital asset, then you are actually selling the stock of the S corporation and it would be taxed as a capital gain. That is one reason why a seller of a business tries to structure the sale as a stock sale instead of an asset sale, so that it gets taxed at the cap gain rates. In that case, the purchaser becomes the owner of the corporation. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 21, 2014 Report Share Posted March 21, 2014 If you are the shareholders and are selling your stock, you're selling capital gain stock, long term or short term depending upon when you acquired the stock. Probably long term capital gain rates to you. If the S-corporation is selling its assets or a part of the business, then it might be selling business equipment on 4797 or a block of inventory or...and it might be ordinary income to the corporation. Follow the money. Quote Link to comment Share on other sites More sharing options...
Randall Posted March 21, 2014 Report Share Posted March 21, 2014 If I were the buyer (or advisor of the buyer), I wouldn't buy the corp, just business assets, name, goodwill, no liability (especially payroll), etc. Form my own corp or LLC. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 21, 2014 Author Report Share Posted March 21, 2014 If I were the buyer (or advisor of the buyer), I wouldn't buy the corp, just business assets, name, goodwill, no liability (especially payroll), etc. Form my own corp or LLC. This is what is going to probably happen. We closed the old S -corp 12/31/2013....and opened the new one 12/13. We want the buyer to open his own, and we'll close ours. There is no inventory...or equipment as far as things we bought. So, if the buyer gives us a check for $XXX...we put it in our personal account, and it becomes Line 21 income? I just want to keep this as simple and legit as possible. Thanks for the responses. For personal reasons I don't want to start asking my CPA...because we've had offers in the past..and when I asked her she just keeps sending me links and reminds me that she isn't a lawyer. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 21, 2014 Report Share Posted March 21, 2014 OK, you aren't selling the corporation's stock, so the company is selling some sort of asset. You said it isn't inventory or equipment, so what exactly is the purchaser paying for? Is it a customer list, the company's name, goodwill, or what? Whatever it is, it doesn't go on line 21 of your personal return. It sounds like the company is selling something of value that should be reported through the S corporation. Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted March 21, 2014 Report Share Posted March 21, 2014 If it went into the S corps books, the S corp sold assets, tangible or intangible. How you take the cash out depends on many other factors, but the income will flow thru your K1. I would lean to taking it as a distribution, taking into consideration reasonable compensation rules and compensation history, the nature of what's being sold, etc. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 21, 2014 Report Share Posted March 21, 2014 If the corp sells something, then it will flow to you in the normal way on your K-1 and you'll report accordingly. Put the money in the corp bank account, If you sell your stock in your corp, Schedule D. Put in your personal bank account. Did you close a previous corp during 2013? Distribute all assets to the shareholders? Follow the money. Quote Link to comment Share on other sites More sharing options...
OldJack Posted March 21, 2014 Report Share Posted March 21, 2014 >>And I din't want to ask my CPA because she wii inundate me with links and I 'me not even sure what's happening....and then she will tell me she cannot give me legal advice....blah blah<< You are over your head on this and you are crazy if you don't take it to your CPA. 3 Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 21, 2014 Author Report Share Posted March 21, 2014 In reality what we are selling is "the phone number"...."the lease"......."the Goodwill" in the neighborhood. The new owner will probably throw out all of my husband's old junk and machinery. This business is 45 years old...and for some weird reason my husband thought I could "do it all".....but it gave me chronic indigestion because I just didn't know what I was doing. So...about 5 years ago we reincorporated...and I gave the account to my friend/colleague to do. No new assets were bought. We closed that corporation a couple of months ago because we wanted to change the name and ownership. Anyway...my husband is 79....the business is barely making a profit (it's more of a hobby...to keep him busy)...and someone offered him a few dollars. So...the only thing the buyer is getting is establishing himself in a known location with a good lease. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted March 22, 2014 Report Share Posted March 22, 2014 So what happened when you liquidated the corp? How have you been operating since then? Yeah, you gotta flow the money. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 22, 2014 Author Report Share Posted March 22, 2014 So what happened when you liquidated the corp? How have you been operating since then? Yeah, you gotta flow the money. I initially put $10,000 into that corp. when we closed it I took out the $10,000....and after the bills were paid, the rest of the bank account became our wages ....except for a few dollars just to keep the bank account open. Then I put $3000 into the new corps bank account. I generally paid us a specific amount every other month. However, right now there's not even enough in the account to pay us the regular amount. DH comes home very early half the time...he's had enough with working. I really just want to end things in the easiest way. Another reason I am not at this point telling my CPA/friend is that since nothing is for certain I don't want to make an announcement. As long as we can get the money without FICA tax....I'm good. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 22, 2014 Author Report Share Posted March 22, 2014 To add....this is a locksmith shop right now. I was just told the buyer wants to gut and renovate...and turn it into a small convenience type hardware store. So, anything there now will probably end up in the trash....and what he is buying is "lease rights" and goodwill...not inventory or machinery. Quote Link to comment Share on other sites More sharing options...
Randall Posted March 22, 2014 Report Share Posted March 22, 2014 As others have said, if you're an S Corp, the money received goes thru S Corp, then distributed to you. As old Jack said, see your CPA on how to handle this regarding the tax reporting. NOT just straight to 1040 line 21. Quote Link to comment Share on other sites More sharing options...
grandmabee Posted March 23, 2014 Report Share Posted March 23, 2014 but if you are leaving the equipment and inventory there. it is included in the sale. You have no say over what the new owner does with the stuff. Seller and buyer agrees on break down of sale price because it does need to be disclosed on tax returns.... form 8949 Quote Link to comment Share on other sites More sharing options...
joanmcq Posted March 23, 2014 Report Share Posted March 23, 2014 I initially put $10,000 into that corp. when we closed it I took out the $10,000....and after the bills were paid, the rest of the bank account became our wages ....except for a few dollars just to keep the bank account open. Then I put $3000 into the new corps bank account. I generally paid us a specific amount every other month. However, right now there's not even enough in the account to pay us the regular amount. DH comes home very early half the time...he's had enough with working. I really just want to end things in the easiest way. Another reason I am not at this point telling my CPA/friend is that since nothing is for certain I don't want to make an announcement. As long as we can get the money without FICA tax....I'm good. You said you shut down the corp several months ago. The sale is taking place now. So you must have liquidated the corp when you shut it down, and distributed the assets to yourselves, and have been running the shop as....sole proprietor? Quote Link to comment Share on other sites More sharing options...
Randall Posted March 23, 2014 Report Share Posted March 23, 2014 Right joanmcq. But she said she started a new S Corp too. She needs a face to face with her CPA to sort this out. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 23, 2014 Author Report Share Posted March 23, 2014 I finally discussed this with my CPA...and instead of a bunch of links...she told me what to do. For the record....the buyer is doing us a favor by taking the lease off our hands...and what we are supposed to get is minimal. The business itself is not making any money. I can't even make my payroll to myself this month. There was no investment in either machinery or supplies. The machinery is very old (DH still uses one of those old AT&T black table phones).,,and all purchases were used immediately....no inventory....except the old junk that was sitting there and gathering dust. It's very basic.... Anyway...thanks so much for the advice..... Quote Link to comment Share on other sites More sharing options...
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