No. A Coeur d’Alene S-Corporation can differentiate between W-2 wages and disbursements paid after a reasonable wage has been met. In the Idaho S-Corporation, W-2 wages and employment taxes are an expense to the company. Any profits, thereafter, are distributed and taxes are paid as ordinary income on each owner/shareholders tax return.
No. If your business is formed as a Coeur d’Alene S-Corporation, then there is no other taxation option available.
However, the IRS does not have a separate taxation category for Idaho LLCs. This allows the LLC members to elect at their own discretion a form of taxation that makes the most sense for their business. An Idaho LLC can elect to be taxed as an Idaho S-Corporation, but not the other way around.
Yes. Pass-through taxation applies to Idaho sole proprietorships, Idaho partnerships, Idaho Limited Liability Company LLC and Idaho S-Corporations. For taxation purposes, income from your Idaho business can be treated as your own personal income.
This is opposed to traditional, or C-Corporations, where the company itself pays corporate taxes on income before paying profits as dividends to shareholders.
Consigned inventory is merchandising a Coeur d’Alene business or an individual places with another business for the other business to try to sell. A dressmaker may consign inventory to a dress shop. The person consigning the goods (the dressmaker) has not made a sale and does not get paid until the business that has taken the goods in on consignment (the dress shop) sells the goods.
For tax and inventory purposes, the consignor (in this example, the dressmaker) has not sold the dress. There is no income to report. The dress inventories. The consignee (the dress shop) has not purchased the dress from the dressmaker until it sells the dress to its customer. The dress shop does not include the dress in its yearend inventory.
Yes. Even though a Coeur d’Alene S-Corporation uses a pass-through taxation method, owners/shareholders are able to differentiate between a wage and a disbursement. However, a reasonable wage must be paid out to those working in the business before any disbursements are paid out to other owners/shareholders. This reasonable wage must have been paid on a W-2 with employment taxes paid.
A reasonable wage is best determined by the replacement cost of that position on the open market.
Example
If the Idaho S-Corporation profited $58,000 this year and a reasonable wage is $75,000, then all $58,000 must be paid as the reasonable wage. Until the reasonable wage has been met, no disbursements can be made.
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