Should my wife and I as freelancers take all payments into my corporation?

UPDATED: Oct 2, 2022

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Should my wife and I as freelancers take all payments into my corporation?

My wife works freelance as a graphic designer and I work for myself as a music teacher and apart from all this I have a corporation I set up for my web business and music business which has not took off at this point but I have the corporation just the same. Would it make sense to have all our payments to each of us my music

lessons included as well as my wife’s freelance work made out to my corporation? On one hand, it would make things better organized but would we save money paying taxes too?

Asked on October 12, 2019 under Business Law, New York


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

If the corporation is a C-corp, it would be worse for you, since a C-corp itself pays taxes (albeit at a lower, corporate rate), then any money you and your wife takes out (whether as a salary or as dividends/distributions) is taxed again as part of your personal income. You'd set yourself up for double taxation.
If it's an S-corp, you would avoid the double taxation issue. Whether it would offer you an advantage depends on whether (and what, and how much) "business" expenses you could effectively take through it. Possibly you could, given the businesses you describe, put a large part of computer, phone, internet, cell service, etc. costs through the business more easily if you have a corporation paying the costs, and that savings may be worthwhile. A good idea would be to take your last year's tax returns, the amount of your arguably business-related expenses, and meet with an accountant or tax preparer to see if you'd get better tax advantages through the corporation or not. 

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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