Should my wife and I as freelancers take all payments into my corporation?
Question Details: 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?
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.