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: My wife and I own a C Corporation. Each of us owns 50% of the shares and are the only employees of the corporation. We formed the corporation in 2000 with the view of eventually establishing a software outsourcing business. To that end my wife and I started working as employees of our corporation providing contract services in various Finance and Healthcare companies. However in 2003 I found it difficulat to find satisfactory contracting opportunities, so I started working as a full time at employee of one of our client. For the same reason, my wife did the same last year. As a result this year the corporation has negligible revenue. It has about one hundred thousand dollars in retained earning. All of the retained earnings are in money market accounts earning very little by way of dividends.
Now we are planning to start a medical software service business initially concentrating on billing and transcibing areas.We anticipate that the software development and data entry work will be done in India. I am planning to quit my current job and work full time on business development. My wife will continue her job earning about 90K. I expect the corporation to incurr significant expenses for travel to India and potential clients in US. As a result the corporation is expected to show a loss over the next 2 or 3 years.
Does is make sense to convert the C Corporation into S corporation so that corporation's loss can be deducted from our personal income?
Will there be any issues with respect to the 100K in the C Corporation's retained earnings? As mentioned above the retained earnings are in cash and there are no capital gains.
Thanks for your help.

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