The document provides an overview of key concepts for understanding and interpreting various types of tax returns, including:
- It defines sole proprietorships, partnerships, C and S corporations, and LLCs and the different tax forms associated with each (Schedule C, Form 1065, Form 1120, Form 1120S).
- It highlights things to check on all tax returns like the name, tax period, and signature.
- It explains the relationship between individual and business tax returns and how profits/losses flow through to owners.
- It introduces common financial ratios used to analyze businesses from their tax returns like profit margin, current ratio, and accounts receivable/payable turnover.
- It
CTKnowledgeShare: CT Corporation is dedicated to educating our customers on the most current and essential topics for corporate legal and compliance professionals.
When a business owner decides to sell the company, there are different scenarios to consider ensuring the sale benefits the seller as much as possible. It’s imperative that the owner should understand the tax implications and how they relate to the company’s corporate structure. When starting a business or changing your business structure, one of the most common options business owners evaluate is whether to form an S corporation or C corporation. These are the two most common ways to incorporate, and the choice really depends on your business goals.
CTKnowledgeShare: CT Corporation is dedicated to educating our customers on the most current and essential topics for corporate legal and compliance professionals.
When a business owner decides to sell the company, there are different scenarios to consider ensuring the sale benefits the seller as much as possible. It’s imperative that the owner should understand the tax implications and how they relate to the company’s corporate structure. When starting a business or changing your business structure, one of the most common options business owners evaluate is whether to form an S corporation or C corporation. These are the two most common ways to incorporate, and the choice really depends on your business goals.
There are many people creating new entities in order to protect their assets and liability. This small presentation of running an S-Corporation has been provided to offer some "Basic" understanding of certain requirements that are often overlooked when choosing the S-Corporation entity type.
American Incorporators has been helping businesses incorporate for more than 35 years. Here, we break down the pros and cons of the most common business entities: C-Corporations, LLCs and S-Corporations.
S corporations are legally structured in a way that allow them to go untaxed. This is because income that is recognized by owners is taxed at the personal level and not via the business. Moreover, an S corporation is a pass-through or flow-through entity, which means income passes through to the shareholders. This newsletter details tax management information and methods used by and relevant to S corporations.
An investment club is formed when a group of friends, neighbors, business associates, or others pool their money to invest in stock or other securities. The club may or may not have a written agreement, a charter, or bylaws.
The benefits from an ESOP can provide meaningful value to the selling shareholder(s), the company and the employees participating in the Employee Stock Ownership Plan (ESOP). Tax issues should not drive the decision to sell a business, but once the decision is made, the tax benefits of the ESOP make it a viable alternative to selling to a strategic buyer. This presentation takes a close look at the IRC section 1042 capital gains tax deferral that applies when selling a business to an ESOP.
Form 990, IRS Form 990, Nonprofit Accounting, Salinas Nonprofit CPA, Salinas Nonprofit Accounting Information on the revised Form 990 from Hayashi & Wayland CPAs,
Understand the various legal forms of a business and the opportunities and challenges associated with each form
http://frombootstobusiness.com/category/from-boots-to-business/business-legal-principles/
C-Suite Snacks Webinar Series: Tax Structures to Reduce Cost and Improve Comp...Citrin Cooperman
Sign up for our weekly C-Suite Snacks webinars here: https://www.citrincooperman.com/infocus/c-suite-snacks
Our C-Suite Snacks webinar series provides the middle market with brief, strategic, and tactical business improvement information for 30 minutes every week. Join Citrin Cooperman live every Thursday at noon for snack-sized insights for business executives.
Running a business can be quite difficult, and the process of getting things up and running often overshadows other considerations, such as what type of business tax structure you should operate under. During this session, we covered how to structure your business for optimal tax benefits. Key takeaways included:
- Best tax structure for your business
- New insights on tax structure
- Tips to avoid tax traps based on the type of structure
There are many people creating new entities in order to protect their assets and liability. This small presentation of running an S-Corporation has been provided to offer some "Basic" understanding of certain requirements that are often overlooked when choosing the S-Corporation entity type.
American Incorporators has been helping businesses incorporate for more than 35 years. Here, we break down the pros and cons of the most common business entities: C-Corporations, LLCs and S-Corporations.
S corporations are legally structured in a way that allow them to go untaxed. This is because income that is recognized by owners is taxed at the personal level and not via the business. Moreover, an S corporation is a pass-through or flow-through entity, which means income passes through to the shareholders. This newsletter details tax management information and methods used by and relevant to S corporations.
An investment club is formed when a group of friends, neighbors, business associates, or others pool their money to invest in stock or other securities. The club may or may not have a written agreement, a charter, or bylaws.
The benefits from an ESOP can provide meaningful value to the selling shareholder(s), the company and the employees participating in the Employee Stock Ownership Plan (ESOP). Tax issues should not drive the decision to sell a business, but once the decision is made, the tax benefits of the ESOP make it a viable alternative to selling to a strategic buyer. This presentation takes a close look at the IRC section 1042 capital gains tax deferral that applies when selling a business to an ESOP.
Form 990, IRS Form 990, Nonprofit Accounting, Salinas Nonprofit CPA, Salinas Nonprofit Accounting Information on the revised Form 990 from Hayashi & Wayland CPAs,
Understand the various legal forms of a business and the opportunities and challenges associated with each form
http://frombootstobusiness.com/category/from-boots-to-business/business-legal-principles/
C-Suite Snacks Webinar Series: Tax Structures to Reduce Cost and Improve Comp...Citrin Cooperman
Sign up for our weekly C-Suite Snacks webinars here: https://www.citrincooperman.com/infocus/c-suite-snacks
Our C-Suite Snacks webinar series provides the middle market with brief, strategic, and tactical business improvement information for 30 minutes every week. Join Citrin Cooperman live every Thursday at noon for snack-sized insights for business executives.
Running a business can be quite difficult, and the process of getting things up and running often overshadows other considerations, such as what type of business tax structure you should operate under. During this session, we covered how to structure your business for optimal tax benefits. Key takeaways included:
- Best tax structure for your business
- New insights on tax structure
- Tips to avoid tax traps based on the type of structure
With tax season around the corner, Generations Federal Credit Union and SCORE Mentors presents, "SCORE: Tax Responsibilities for Business Owners" on 11/20/14. David Plemons, CPA walks small business owners through the ins and outs of business owner responsibilities for tax season.
purchase price allocation (PPA) is an application of goodwill accounting whereby one company (the acquirer), when purchasing a second company (the target), allocates the purchase price into various assets and liabilities acquired from the transaction.
Everything your startup needs to know about accountingThe Idea Village
Don't get lost in the accounting world as you steer your venture to success! In this IDEAinstitute, attendees will be guided by the accounting startup compass: tools and insights of the trade necessary to reach your venture's destination.
Tax Essentials for North Carolina LLC OwnersBen Wann
Navigating the complexities of taxes is a crucial aspect of managing a Limited Liability Company (LLC). This presentation is specifically tailored for LLC owners in North Carolina, providing them with essential information and practical guidance to handle their tax obligations effectively.
M4A1 Keno Enriquez posted Mar 5, 2018 11:46 AM
C Corporations
C corporation is a business term that is used to distinguish this type of entity from others, as its profits are taxed separately from its owners under subchapter C of the Internal Revenue Code. In an S corporation, the profits are passed on to the shareholders, and are taxed based on personal returns. A regular corporation (also known as a C corporation) is taxed as a separate entity. The corporation must file a Form 1120 each year to report its income and to claim its deductions and credits.
A C corporation can deduct the cost of benefit as a business expense. For example, they can write off the entire costs of health plans established for employees as business expenses. These benefits are tax-free even for those receiving them.
S Corporations
S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.
The big benefit of S-corp taxation is that S-corporation shareholders do not have to pay self-employment tax on their share of the business’s profits. For example, Larissa is the sole owner of her S-corporation, an advertising agency. Her revenues from the business are $50,000 per year, and her annual expenses (not counting salary) total $10,000. Therefore, her S-corp’s profit for the year (before subtracting her own salary) is $40,000.
Limited Liability Companies (LLCs)
A limited liability company (LLC) is a corporate structure whereby the members of the company cannot be held personally liable for the company's debts or liabilities. Limited liability companies are essentially hybrid entities that combine the characteristics of a corporation and a partnership or sole proprietorship
Although LLCs have some attractive features, they also have a number of disadvantages, especially in relation to the structure of a corporation. A LLC has to be dissolved upon the death or bankruptcy of a member, unlike a corporation, which can exist in perpetuity. Also, a LLC may not be a suitable option when the objective of the founder is to eventually become a publicly listed company.
LLC members are considered self-employed business owners rather than employees of the LLC so they are not subject to tax withholding. Instead, each LLC member is responsible for setting aside enough money to pay taxes on that member's share of the profits. The members must estimate the amount of tax they'll owe for the year and make quarterly payments to the IRS.
References:
IRS (2017). S Corporations. Retrieved from https://www.irs.gov/businesses/small-businesses-self-employed/s-cor ...
Taxes and Finance: Structuring Your Horse Business to SucceedGwyn Shelle
A presentation from the Equine Business Conference presented by Michigan State University, University of Minnesota, University of Nebraska, and Iowa State University, and partly funded by the North Central Regional Center for Rural Development. Presenter: Michelle Greenlee, Farm Financial Consultant.
This is one of presentations from the 2009-2010 Game Industry Start Up Workshop Series. The first workshop topic was "How to Form and Protect Your Business" and it took place on 9/15/09.
2. Outline
• Introductions
• Sole Proprietorship
• Partnership
• Corporation
• S Corporation
• Limited Liability Company (LLC)
• Key Financial Ratios
• Tax Return Interpretation
• Individual Tax Return (Form 1040)
• Proprietorship (Schedule C)
• Partnership and LLC (Form 1065)
• Corporation (Form 1120)
• S Corporation (Form 1120S)
3. First things first…
• CHECK:
Check the Name
Individuals
Business
SSN
Tax Period covered
Complete return ( will cover more later)
And very important…..
4. IT MUST BE SIGNED
“Under penalties of perjury, I declare that I have examined this
return and accompanying schedules and statements, and to the
best of my knowledge and belief, they are true, correct, and
complete. Declaration of preparer (other than taxpayer) is
based on all information of which preparer has any
knowledge”
6. Entity Sole
Proprietorship
C corporation S corporation Limited &
General
partnership
Limited
Liability
Company
(LLC)
Tax Form IRS form 1040-
Schedule C or EZ
IRS Form 1120 IRS Form 1120S IRS form 1065 • One member:
Form 1040
Schedule C
• More than 1
member: Form
1065
Owners No separate forms •1099-contract
work
•W2-salaries
(Schedule E)
•Schedule K-
•Schedule K1
•1099-contract
work
•W2-salaries
•Schedule K1
•1099-contract
work
•W2-salaries
Schedule K1
1099-contract
work
W2-salaries
7. Sole Proprietorship
• Definition by the IRS:
• an entity that is an incorporated business owned by a single
taxpayer
• Tax implications
• Use schedule C for reporting income and expense
• Subject to self-employment tax (FICA) taxes on employee income
• Subject to both employer and employee portion of FICA for the
sole proprietor
• Advantages:
• Easy tax returns (only need to fill out schedule C compared to
other forms of business)
8. Limited and General Partnership
• IRS Definition: a relationship between two or more persons who
join to carry a business. Each person contributes skills, labor or
capital, and expects to share profits and losses of the business
• Tax Implications:
• Must file a separate annual return to report income, losses,
deductions and gains, etc. (Form 1065)
• A partnership does not pay income taxes; profits or losses pass
through to individual partners on his or her individual tax return
• Partners are not employees, therefore must pay both income tax
and self-employment tax
• Advantages: partners of limited partnership separate personal
liabilities from liabilities of the partnership entity
9. Corporation
• IRS Definition: prospective shareholders exchange
money or property for corporation’s capital stock. C-
Corporation is recognized as a separate taxpaying entity
(Form 1120)
• Tax Implications:
• Profit of a corporation is taxed when earned, and taxed again when
passed through to individual shareholders– “double taxation”
• Loss cannot be deducted by individual shareholders; dividends are
not tax-deductible for corporations
• Need to pay income tax and employment taxes including:
• Social security and Medicare taxes
• Income withholding
• Federal unemployment tax (FUTA)
10. S Corporation
• IRS Definition: S Corporation are corporations that elect to pass
corporate income and losses to shareholders for federal tax purposes.
To qualify, the corporation must meet the following requirements:
• Domestic corporation
• Shareholders can only be individual, certain trust and estates
• Have one class of stock
• Have no more than 100 shareholders
• Tax Implications:
• Shareholders report income and losses on their personal tax returns at the
individual income tax rate (Form 1120S)
• Avoid double taxation experienced by corporations
11. Limited Liability Company
(LLC)
• IRS Definition:
• A LLC is allowed by state statute. Depending on elections made by members of the LLC, the IRS will treat a
LLC as either a corporation, partnership, or a disregarded entity (income and losses passed through to
individual members)
• Members of the LLC enjoy “limited liabilities’– separate personal liabilities from liabilities of the LLC
Texas Louisiana Alabama
Formation
Requirements
One member is allowed
to form a LLC (at least
one member); member
can be individual,
partnership, corporation
or any other legal or
commercial entity
Two or more members;
previous entity can be
corporation or
partnership before
electing to be LLC
One or more members or
managers
State Income Tax
Classification
State taxes as LLC as
corporations; no state
personal income tax
Follow Federal
classification with
respect to corporate
income tax but not
franchise tax
Follows Federal Income
Tax Classification
12. Key Financial Ratios
• Profit margin:
• Profit Margin=
Net Profit
Revenue
• Applies only to Form 1120, 1120S or Form 1065
• Current Ratio: Measures the ability to pay short-term obligations
• Current ratio=
Current Assets
Current Liabilities
• Debt service Coverage: measures the ability to produce enough cash to cover its debt payments
(>=1)
• DSCR=
Net Operating Income
Total Debt Service
(total debt service includes annual mortgage payments such as principal,
interest, property taxes and payments to all other loans)
• Accounts Receivable Turnover: measures the efficiency of a company to use its assets; a high
ratio may imply that a company operates on a cash basis, or its extension of credit and
collections of receivables are efficient
• A/R Turnover=
Sales Revenue
Average Accounts Receivable
• Accounts Payable Turnover: Measures the rate at which a company pays off its suppliers
• A/P Turnover=
Total Purchases
Average Accounts Payable
13. IndividualTax Return
IRS Form 1040 most common for individuals
that owned a business.
The first page shows a summary of the different
sources of income-Including:
a) Salaries
b) Dividends from investments or from C
corporation
c) Business profits (Schedule C)
d) Schedule D- Capital gains from Investments
e) IRA Distributions
f) Schedule E- Rental real estate, royalties,
distribution of profits/losses from
partnerships, S corporations, trusts, and other
businesses organized different than sole-
proprietorship
g) Social Security Benefits
Need complete tax return- check first page for
verification of schedules needed.
16. Sole Proprietorship: Example
Part I: Income Section
Line 1: Gross Revenue: $60,288
Line 4: Cost of Goods Sold
Line 5: Gross Profit=Gross
Revenue-COGS: $60,288
Part II: Expense Section
Line 28: Total Expenses before “expenses for
business use of home” (line 30): $42,439
Line 31: Net profit: $18, 501
18. IRS Form 1120-C Corporation
Page one: Income and Tax
Deductions Section
Line 1b: Gross Revenue $670,525
Line 2: Cost of Goods Sold $330,206
Line 3: Gross Profit $280,524
Line 18: Interest Expense
Line 34: Total estimated current year tax
payment due
19. IRS Form 1120-C Corporation Schedule L: Balance Sheet Per Books
Line 1-6: Current Asset Accounts
Line 16-18: Current Liability Accounts
End of the Year Balance
Balance as of the Beginning of the Year
Line 1: Net Income per books