Until I became a tax professional I had never heard of a “Corporation Sole.” It’s a legal entity consisting of a single incorporated office, occupied by a single person. It’s a corporate structure used mainly for religions organizations so that office holders can have a successor for their office.
When used for a religious organization, a corporation sole doesn’t pay taxes. It has nothing to do with the corporation sole and everything to do with the fact that a church is a charitable (501(c)(3)) organization that generally doesn’t pay tax. Used properly, a corporation sole is a useful vehicle for churches.
Of course, where you and I wouldn’t go the bozo tax element quickly moves. Even though the IRS has warned about corporation soles since 2004, promoters still tried to sell the snake oil to the gullible. One such entity was Trioid International Group Inc. Trioid, here in nearby Henderson, currently markets itself as a company specializing in being a Nevada registered agent and will help individuals set up a Nevada corporation. That seems like a good, legal business (and it likely is).
However, a visit to the Internet wayback machine gives a very different picture of Trioid. Trioid was actively marketing corporation soles in 2005, and had this description of them:
Common law corporation soles are excluded from filing tax returns of any kind under a mandatory exception in the Internal Revenue Code pursuant United States Code, Title 26 §508(c)(1)(A) and there are no record keeping requirements which may be imposed by any taxing or revenue authority. Corporation soles are not required to make any application for this exclusion or exception and are not required to qualify under §501 (c)(3) as a “church”. In other words, the sole exists due to your natural right to freedom of belief and as such, there is no law respecting its establishment or operation which may impair it, including taxation. To tax the overseer is to tax the sole. The tax Code exception provides the corporation sole with the status of “nontaxpayer” in contradistinction to “taxpayer”. The federal courts have ruled that Congress makes no tax laws that apply to nontaxpayers!
The above paragraph is basically out-and-out tax fraud.
Helpfully to prosecutors, the names of the two individuals behind Trioid were in plain view on the web pages: Gerrit Timmerman and Carol Sing. They were indicted back in 2013 and were convicted on Friday of conspiracy to defraud the United States related to their promotion of a tax fraud scheme. They’ll likely get some time at ClubFed to think about what they did.
As always, the usual warning applies: If it sounds too good to be true, it probably is. If you use a corporation sole as a vehicle to avoid taxes, you’re heading down a road that leads to ClubFed.