S-Corp Conversions, Stock Sales, and 1099’s

by | Sep 26, 2010 | Business Owners

While most of the news coming out of Washington these days isn’t good for small business, there are a couple of bright spots in the new small business bill passed by Congress and heading to Obama’s desk for signature. One provision of the $30 billion dollar loan program bailout for businesses is some relief on the 35% built-in gains tax that hits S-corps who sell assets within 10 years of converting from a C-corp.  The bill will lower the period to 7 years, and in 2011 it goes to 5 years.  If you own a C-corp and struggle to keep your profits under $75,000 a year, regularly pay shareholder dividends, or pay high salaries to shareholders, you may want to consider switching to an S-corp.

Also, if your business has $50 million or less in assets, any future sales of stock held more than five years if issued from the time Obama signs the bill to January 1, 2011 will be tax-free.  Also, the excluded gain won’t count in the AMT calculation.  This could be an interesting incentive for business owners to accelerate the sales of stock they may be contemplating in the near future. 

One last item: if you are a landlord you won’t be getting out of the mandate by the healthcare bill requiring all business owners to send 1099’s to any service provider you’ve paid more than $600 to over a year’s time.  You better start collecting tax ID numbers now so you won’t be hit with penalities come the filing deadline in 2011.  And Congress wonders why small business owners are so upset.  This is just one of the many new regulations that needlessly take time and money out of the pocket of business that could otherwise be used to expand markets and create jobs.

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