The Revenue Reconciliation Act of 1993 eliminated or sharply reduced many employee benefits, such as moving expenses, club dues, business meals and entertainment, and spousal travel costs. Employer provided health and disability insurance coverage provided to a class of employees is excluded from wages for FICA tax purposes. Generally, amounts contributed on an employee's behalf to a qualified plan will not result in FICA tax to either the employee or employer, and distributions to the employee are not subject to FICA tax. Important limitations apply in this complex area. You should consult with a qualified tax specialist in your planning.
Most small businesses lose money for their first six to eighteen months.
Often the shareholders invest their savings in the new venture. An S corporation causes the losses to flow through to the shareholders and reduces their personal taxes. Although items to be considered in electing S corporation status involve more than the flow through of start-up losses, use of an S corporation can improve shareholder cash flow by reducing their taxes. The Revenue Reconciliation Act of 1993 dramatically changed planning for S corporations. Review your situation with your tax advisor.