Resources for analyzing Form of Business Entity

[Larry Weinstein]

Can anyone share any Resources for analyzing Form of Business Entity??? Software, checklists etc and how you structure such an engagement, approx time and fees???

Thanks in advance..

Larry

[Bees Knees]

TTB, page 5-5 & 5-6 says it all. What further needs to be said?

Personally, I don't think there is any question that a Small Business these days should be an LLC. No payroll tax headaches. No balance sheet if it is a single owner business. Great flexibility.

I think sometimes too many choices makes for unnecessary complex decision making. Just keep the entity as simple as it needs to be.

[veritas]

Kiss

I believe in the KISS method. It has served me well. Our entity of choice is usually SCorp. We like payroll because we make more money. We like selling Simple accounts where the money is paid in every pay period so we make more money. We like an additional tax return because we make more money. We like doing the bookkeeping because....

[OldJack]

In most cases where profit is good (or large) and losses are unlikely, I like C-corps:

1) Why.. C-corp makes me more money than any other entity as there is generally more to do and they in general pay much more for my services.

2) Why.. because if small C-corp profit, a W2 gross for all profit it is basically the same as the LLC-1040 as the corp pays no tax. I have used C-corp even for doctor's personal service corp.

3) Why.. with balancing the tax brackets between the C-corp and the 1040 you can pay a lot less in overall taxes.

4) Why.. taxable dividends paid to the shareholders are at a max of 15%. Albeit after the C-corp has paid income tax with no deduction for dividends.

5) Why.. some tax-free benefits are available with a C-corp that are not with the LLC or S-corp.

6) Why... because the client likes to see a good tax saving plan combining many saving features. Many other preparers in my area don't explain the benefits of the C-corp as they are too tied up with S-corp.. thinking of saving all that self-employment tax which in the overall view may be small.

[Bees Knees]

It may just be my type A personality, but I hate doing corporation and partnership returns that I did not personally do the bookkeeping for. It drives me nuts looking at somebody else’s balance sheet that they prepared using Quickbooks. Has there ever been a correct balance sheet prepared by a client on Quickbooks in the history of the Universe? I think not.

[sea-tax]

It may just be my type A personality, but I hate doing corporation and partnership returns that I did not personally do the bookkeeping for. It drives me nuts looking at somebody else’s balance sheet that they prepared using Quickbooks. Has there ever been a correct balance sheet prepared by a client on Quickbooks in the history of the Universe? I think not.

Bees I agree with you 100%, I infact outside of a few small sch c refuse to do any corporate or partnership return which I or my staff did not prepare the p&l and balance sheet. Life is just tooo short!

[veritas]

We pretty much won't do business returns unless we do the bookkeeping.

[veritas]

In most cases where profit is good (or large) and losses are unlikely, I like C-corps:

1) Why.. C-corp makes me more money than any other entity as there is generally more to do and they in general pay much more for my services.

2) Why.. because if small C-corp profit, a W2 gross for all profit it is basically the same as the LLC-1040 as the corp pays no tax. I have used C-corp even for doctor's personal service corp.

3) Why.. with balancing the tax brackets between the C-corp and the 1040 you can pay a lot less in overall taxes.

4) Why.. taxable dividends paid to the shareholders are at a max of 15%. Albeit after the C-corp has paid income tax with no deduction for dividends.

5) Why.. some tax-free benefits are available with a C-corp that are not with the LLC or S-corp.

6) Why... because the client likes to see a good tax saving plan combining many saving features. Many other preparers in my area don't explain the benefits of the C-corp as they are too tied up with S-corp.. thinking of saving all that self-employment tax which in the overall view may be small.

When my clients sell their business they pay one tax.

[OldJack]

<<When my clients sell their business they pay one tax.>>

So do mine if there is nothing in the C-corp.

[veritas]

My clients like to be able to deduct those loss years against their ordinairy income and get refunds so I look good and they pay me more money.

[S T]

Accountant inherited Business Mess

It may just be my type A personality, but I hate doing corporation and partnership returns that I did not personally do the bookkeeping for. It drives me nuts looking at somebody else’s balance sheet that they prepared using Quickbooks. Has there ever been a correct balance sheet prepared by a client on Quickbooks in the history of the Universe?

I totally agree, but it is just not Quickbooks, it could be any business or prior accountant running any accounting program. I have one here in the office now, that is just a mess, unfornately it is on Peachtree (which I do not know) very hard to discern what is going on and so many entries that seem to be incorrect.

As to entities, I do believe, that LLC's would be a good choice, but for those of us in Calif, we can be limited as to advise on them. Calif imposes a "gross receipts" tax above $250,000 of receipts, so for a lot of retail business clients, would not be a reasonable choice for them. We are speaking of GROSS RECEIPTS! not net income.

I do understand that possibly it is being challenged as unconstitutional, so we will see.

I am thinking, and maybe Jainen, will jump in here, that for rental properties, and small business operations under the $250,000 they can be utilized as a choice of entity form. So a lot of our small business clients in Calif are S Corps if there receipts are over the $250,000 limit.

Sandy

[veritas]

I totally agree, but it is just not Quickbooks, it could be any business or prior accountant running any accounting program. I have one here in the office now, that is just a mess, unfornately it is on Peachtree (which I do not know) very hard to discern what is going on and so many entries that seem to be incorrect.

As to entities, I do believe, that LLC's would be a good choice, but for those of us in Calif, we can be limited as to advise on them. Calif imposes a "gross receipts" tax above $250,000 of receipts, so for a lot of retail business clients, would not be a reasonable choice for them. We are speaking of GROSS RECEIPTS! not net income.

I do understand that possibly it is being challenged as unconstitutional, so we will see.

I am thinking, and maybe Jainen, will jump in here, that for rental properties, and small business operations under the $250,000 they can be utilized as a choice of entity form. So a lot of our small business clients in Calif are S Corps if there receipts are over the $250,000 limit.

Sandy

Don't you also have an annual fee for entities of $800? Ouch!

[OldJack]

My clients like to be able to deduct those loss years against their ordinairy income and get refunds so I look good and they pay me more money.

My clients like to carryback those loss years in full against prior ordinary corp income and get refunds of all taxes previously paid by the corporation without all that complicated determination of what is business and what is nonbusiness and the effect of personal items such as personal exemptions, net capital losses and etc of 1040 NOL. With the proper planning and creation of losses for a C-corp, the corp can go for years with a net corp income tax of zero while providing better tax-free benefits and overall tax savings to the shareholders. Its a legit game you have to learn how to play if you want more than a few hundred dollars for doing a tax return.

[veritas]

Show me

Ok Oldjack you got some good answers. If I have a C-Corp that earns 100K a year for instance tell me what you would do to lower the tax liability keeping in mind I want all the money for personal use. Let's say I have three employees not related.

[OldJack]

It may just be my type A personality, but I hate doing corporation and partnership returns that I did not personally do the bookkeeping for. It drives me nuts looking at somebody else’s balance sheet that they prepared using Quickbooks. Has there ever been a correct balance sheet prepared by a client on Quickbooks in the history of the Universe? I think not.

Bees you are missing the point. Quickbooks prepared by client is money in the bank. Reviewing and correcting corporate books is a CPA's bread and butter. You can charge more for correcting the books than doing the corp or 1065 tax return. You simply prepare the necessary entries needed for the books and let the taxpayer make the entries in Quickbooks so they see how much you reduced the profit and thus saved them on taxes. Nine time out of ten the profit is reduced when the books are adjusted correct without any hanky panky or creative accounting. A client that otherwise would pay you hundreds to do the tax return will pay you thousands for saving him taxes and preparing a financial report that he can take to the bank.