Fri, Jul 03, 2009
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Forming A Corporation |
omicron3000
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Posted: 18:31 on 07-23-2008
I had some questions about forming a corporation.
1.) What is the capitalization of a corporation?
2.)A NV Corp has 75,000 shares (minimal authorized shares, with minimum filing fee, each share has $1 par value), I know this means that I have 75,000 shares, that I also have $75K of authorized capital.
Would this mean that I would have to already have $75K in cash at the moment?
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NewKidInTown3
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Posted: 19:08 on 07-23-2008
1. When talking about a corporation's capitalization, we usually interpret this as referring to a corporations market capitalization. A corporation's market capitalization is generally understood to be an amount equal to the number of "outstanding" shares in the corporation multiplied by the market price of the shares.
2. Authorized shares is a form of capital. On your books, "Authorized Shares Capital" is the value of the stocks which a company may issue. Having $75K in authorized shares capital is not the same as having $75K in cash in your company's bank account.
When the stock is sold, cash from the sale is deposited in your corporation's cash account. The cash is also represented on your books as capital. The sold shares are now outstanding shares and determine your corporation's market capitalization.
Just my view of things.
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bargain76
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Posted: 19:24 on 07-23-2008
The MOST IMPORTANT item in capitalizing a Corporation is LENDING most of the initial capital to the Corp.
A loan can be paid back to the stockholder(s) tax free.
Otherwise, you'll have to pay a Corporate AND a personal income tax when you withdraw earnings from the Corporation.
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omicron3000
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Posted: 16:30 on 07-31-2008
If the loan is repaid back to shareholders, would that mean that my shares would be reissued back to me?
What cash account would I hold the loan money in?
And withdrawal of earnings refers to withdrawal money from salary or divendends paid to my corp?
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On 2008-07-23 19:24, bargain76 wrote:
The MOST IMPORTANT item in capitalizing a Corporation is LENDING most of the initial capital to the Corp.
A loan can be paid back to the stockholder(s) tax free.
Otherwise, you'll have to pay a Corporate AND a personal income tax when you withdraw earnings from the Corporation.
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cjmazur
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Posted: 22:59 on 07-31-2008
what out for borrowing to/from shareholder. That is a transaction scrutinized by the IRS. Also, interest has to be charged, or it will be impuged by the IRS.
I keep cash on hand in a checking account or if <say 100 in petty cash.
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bargain76
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Posted: 03:31 on 08-01-2008
An S-Corp requires no interest to be charged. After all, interest to you is an expense to the Corporation, which balances out.
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bargain76
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Posted: 03:42 on 08-01-2008
Also, the loan has no effect whatsoever on the shares.
Our CPA calculates "Loan From Stockholder" and "Repayment of Loan" at year-end with no special documentation other than the notation at the time the check is written or received.
He has been my CPA over 20 years, we have been IRS-audited for 2 years without major penalty....unless you consider "personal use of a Company vehicle" a major penalty.
We do operate as S-corps. 4 or 5 of them, actually.
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omicron3000
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Posted: 13:23 on 08-02-2008
The info you have told me is very interesting. Would my salary paid in my corporation stay in the corp, or be paid to me?
The reason I ask that is because, in the past the IRS would try to attempt to state that dividends paid to me in my company would be treated as a salary?
Example:
But then it would need to be explained to them that in the agreement with the board of directors that I would have to defer payments to myself until my company was able to obtain consistent cash flow?
From what I am hearing, I might not be able to spend any of the money I earned and worked so hard for? (with my corp salary, after all expenses are paid, and choosing a fiscal year, later than Sept for example).
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