Accounting News and Notes

Duluth/Gwinnett CPA: Should You Put Real Estate in a Self-Directed IRA?

The below is a sample inquiry that we might receive off of web site considering putting real estate into a self-directed IRA.

I am a retired and cannot work on a full or part-time basis consistently. I need your help in deciding( options) which is the best way to go with my real estate investments. Should I purchase them through my-self directed (deductible) IRA or should i open an entity such as a LLC. With a lack of knowledge i could open PANDORA’S box if i don’t consult a professional first. With that said. My 2 main Questions to you are How can you help me and what will it cost? 

Below is my response:

Thanks for visiting www.HisCPA.com 

The most important thing you can do in getting started is to call a CPA! You have done the  right thing to get started.

I would not suggest doing a self directed IRA for real estate investing. A self directed IRA is not a simple legal structure and can if managed poorly can lead to Tax Penalties from the IRS. Predominant problematic issues center around any potential appearance of self dealing or that you might personally benefit from the property’s ownership precluding one/one’s family from  living in a property or receiving directly any rental income. For you investing might I suggest you talk to Mr. Mike Allee at Edward Jones at 678 372 6288.

For you real estate investing I suggest you might consider setting up an LLC for your real estate investing with Mr. Rick Campbell, Atty at 770 564 2600.

After you get your LLC incorporated please forward me copies along with the LLC EIN, copies of your last filed personal income tax return and use the attached form to recap your rental property at year end when we do your taxes and use tax checklist on my web site at http://www.hiscpa.com/newclient.html

I look forward to serving as your CPA.

John Dillard, CPA of His CPA, PC, 1940 Woods River Lane, Duluth, GA 30097 Phone 770-814-9304 www.HisCPA.com A Christian CPA Firm

Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!

Duluth/Gwinnett CPA: Incorporating Your New Georgia Business

Incorporating 101: Ensure the Incorporation Process Works for You

Incorporating in Georgia
Starting your business off with the best tax elections for your business are amongst the most important business decisions you will ever reach. Discover how you can best set yourself up for business success as you consider this critical part of your business start-up. See http://www.hiscpa.com/incorporating-articles.html

Nevada and Delaware Incorporation
The incorporation of your business may cost you thousands in unnecessary registration and filing fees. Discover the ins and outs of this important decision and how to avoid unnecessary pitfalls and headaches. Visit http://www.hiscpa.com/incorporating-nv.html

Determining Where to Incorporate
The decision of where to incorporate your business is a critical component of getting your business started. Learn what you need to know to make a well-informed decision. Visit http://www.hiscpa.com/incorporating.html

John Dillard, CPA of His CPA, PC (An Atlanta Christian CPA firm) 1940 Woods River Lane, Duluth, GA 30097 Phone 770-814-9304 www.HisCPA.com Incorporating in Georgia, Setting up an LLC in Georgia, Setting up an S Corporation in Georgia, Georgia Entity Selection, Converting Your GA LLC to an S Corporation, Converting Your GA C Corporation to an S Corporation, GA LLC, GA S Corporation and Converting Your Georgia Business to an S Corporation

Converting Your Georgia Business to a Georgia S Corporation

Whether you are a new business that is or an C Corporation, a unincorporated proprietorship or an LLC you can change entity types for tax purposes which may result in a lower tax obligation.

LLC’s came in vogue when Georgia enacted legislation allowing an LLC (Limited Liability Company) to be established. Although the LLC does allow for some greater flexibility and ease of operation it often results in a higher tax obligation that might not have been incurred if the business was an S Corporation.

Tax law treats all the earned income from an LLC as being subject to both FICA & Medicaid taxes whereas an S Corporation has to pay those taxes reflected on W-2′s. For tax purposes, the law allows an S Corporation to legally convert to being an S Corporation as long as all active employee/owners pay themselves a fair and reasonable salary. This number is best determined by the facts, position, and profit of a business and the truest test of this calculation is what a business owner would have to pay someone else to perform their position. All businesses are unique and therefore all saving opportunities are different. But even the smallest of businesses with the smallest of profits may save several thousand dollars by converting from an LLC to an S Corporation.

There are only four rules to qualify for being an S Corporation. You must: -Have a December 31st year-end. -Have less than 100 shareholders. -Have shareholders who are U.S. citizens or resident aliens. -Have only one class of stock.

Becoming an S Corporation is often a prudent decision for the following types of business:

-Trade Contractors such as builders, painters, landscapers, electricians, plumbers, etc.

-Retail shops such as boutiques, restaurants, clothing stores, furniture, appliances, video equipment, etc.

-Computer technicians such as contractors, retailers, repairs, programmers, etc.

-Sales Representatives including residential and commercial real estate agents, brokers, including those of most all types and territories.

-Distribution companies, resellers, wholesalers, and those in the distribution chain of a product of service.

-Service companies including consultants of all types, single owner physicians, dentists, doctors, chiropractors, etc.

We offer a free initial consultation to see if converting your business to an S Corporation for tax purposes makes sense to you. Put our decades of experience to work for you ensuring you pay your lowest legal possible tax. Choosing an Entity Type for Your New Business

Your initial choice of entity is perhaps the most important tax, financial and legal decision you might ever reach. Being well versed in these areas is essential to a wise and prudent decision. To learn more visit http://www.hiscpa.com/article2.html

Tax Effects of Entity Choice when Incorporating in Georgia

Carefully considering the tax effects of your entity choice is essential to getting your business off on the right foot. Being careful to avoid, if at all possible, the double taxation of C Corporations and then selecting the right entity for your business from both a tax and legal perspective is critical. To see an example of the tax effects of entity choice visit http://www.hiscpa.com/article6.html

Top 10 Things to Consider When Incorporating in Georgia http://www.hiscpa.com/blog/2012/01/13/top-10-things-to-consider-when-incorporating-georgia/

John Dillard, CPA of His CPA, PC, 1940 Woods River Lane, Duluth, GA 30097 Phone 770-814-9304 www.HisCPA.com A Christian CPA Firm

Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!

^{Atlanta CPA on Statute of Limitations on IRS Collections}

Know Your Tax Rights/Addressing Back Taxes with the IRS

^{Knowing the ins and outs of tax law can do much to help you along the way to make sure all of your tax issues are well understood and handled. Tax law is complicated, understanding some of the individual nuances will always be of great assistance. One way to be sure that you do not run afoul of a few of the basics will help you make wise and informed decisions. Just as a physician first strives to get a good understanding of the patient, their history and their symptoms before offering a diagnosis, so it is critical for a CPA to understand the underlying causes and tax problems, to address their causes and effects and to review original source documents that originally caused the liability to start with. If the taxpayers proceeds with haste rather than wise and judicious discernment, they may well lead themselves to far greater financial pain than originally existed. These basic tenants of IRS Statutes of Limitations will do much to enlighten potential tax opportunities and planning:}

^{Statute of Limitations on Refunds}

^{If you file a corporate or personal income tax return more than three years after the original returns due date, then any attendant refunds are lost forever. You cannot apply them to other outstanding years, you can not apply them to future years, as you get absolutely no credit for them at all. This is perhaps one of the greatest tax tragedies as I have personally witnessed taxpayers who would have otherwise received thousands and thousands of dollars of refunds forever legally lose their claim to any potential refund. Unfortunately there are no appeal options and once the three year statue lapses, it is over, you “cannot pass go” and your refund is forever lost.}

^{Ten Year Collection Period}

^{There is a ten year Statute of Limitation on the Internal Revenue Service ability to collect taxes. The ten year statute begins generally form the date the original return was filed or when the tax was assessed by the IRS. During the ten year tax period the IRS is able to use all of its collection tools including liens, levy, garnishment and seizure to protect the rights and interest of the Treasury Department/United States government. After the ten year period lapses the tax is no longer assessable by the Service. However during the ten year period, the taxpayer and the IRS may jointly agree to waive the ten year statute and extend the collection period. This may be advantageous when a taxpayers ability to pay may be improving and enforced collection efforts might prove to have disastrous effects.}

^{Suspension of the Waiver Period}

^{Generally speaking the statute of limitation period lapses after ten years after the return is originally due, filed or assessed. However there are several items which can legally extend the time period that the IRS has to collect outstanding monies. For the items below, the ten year statue is extended for the time the following events were occurring.}

^{Installment Plans. The time that a taxpayer is on a on a plan making regular monthly payments/an Installment Plan is not counted as part of the ten year periods lapsing and is therefore added to and extends the ten year original period.}

^{Suspension of Collection Efforts. If the IRS suspends collection efforts for a time in a effort to work with the taxpayer during legal or tax filings, this period as well is added to the ten year period when determining the statute of limitations. The most common examples of these would be time periods covering Installment Plans, submission and consideration of an Offer in Compromise and the periods covering that of a Bankruptcy filing.}

^{Tax Fraud. In the event that a taxpayer commits tax fraud there is no statute of limitations on either collections or for the auditing of applicable returns.}

^{Often toward the end of the ten year period, taxpayers will discover that collection efforts intensify as the Internal Revenue looks to collect any open tax monies due.}

^{Written by author John Dillard CPA of His CPA at 770 814 9304 and visit http://www.hiscpa.com/ (a Christian CPA firm). At His CPA we march to the beat of a higher drummer where we put the “Golden Rule” to work each and every day by “Serving Him by Serving You…One Tax Return at a Time.”}

www.HisCPA.com IRS representation, Offer in Compromise, Tax Problems/IRS Representation, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Offer in Compromise, Back Taxes, Business Acquisitions/Sales and Bookkeeping.

Duluth/Johns Creek CPA Advises on Incorporating Your New Georgia Business

Incorporation: Choosing a Entity Type for Your New Georgia Business

Evaluating what type of entity your business should be, we strive to balance the legal protection issues vs. the tax savings. Over the years, we have developed the mindset that there is no perfect election but there are ones that are better than others.

My clients tell me that they want to pay as few tax dollars as legally possible. Below are some very specific rules, as well as some generalities. If you are considering incorporating in Georgia, we suggest that you sit down with a tax professional to see how these guidelines relate to you.

Understanding S Corporations

S Corporations can have no more than one hundred shareholders and they all need to be U.S. citizens or resident aliens. This corporation type almost always has to have a calendar year as the fiscal year. S Corporation rules have been around since the 1950s and were set up to simplify the rules and regulations of being a business owner.

Liability Protection and Subchapter S Corporations

An S Corporation, like a C Corporation, affords the business owner personal liability protection from business risks. Some of the keys to maximizing that protection are to treat the corporation like one by doing all your business in the corporate name, signing all of your documents listing your corporate title, not co-mingling any personal issues/bills in the corporation, and by having your annual Board of Directors and Annual Shareholder Minutes Meeting.

Choosing an Entity Type for Your New Georgia Business
Your initial choice of entity is perhaps the most important tax, financial and legal decision you might ever reach. Being well versed in these areas is essential to a wise and prudent decision. See http://www.hiscpa.com/article2.html

Determining How Your New Georgia Business Will Be Taxed: Effects of Entity Choice
Carefully considering the tax effects of your entity choice is essential to getting your business off on the right foot. Being careful to avoid, if at all possible, the double taxation of C Corporations and then selecting the right entity for your business from both a tax and legal perspective is critical. Visit http://www.hiscpa.com/article2.html

Getting Your New Georgia Business Started
Understanding many of the basics of the start of the incorporation process will do much to ensure that you are well-versed and able to make wise and informed decisions. As these issues will affect your business operations and finances during the lifetime of your business they are essential to getting started well. Go to http://www.hiscpa.com/incorporating-guide.html

Determining Where to Incorporate Your New Geogia Business
The decision of where to incorporate your business is a critical component of getting your business started. Learn what you need to know to make a well-informed decision. See http://www.hiscpa.com/incorporating.html

Gerogia Corporation Forms and Registrations Checklist
Whether you are just incorporating or have been in business for years. This summary will enable you to quickly locate the forms and guidance you need to ensure your business maintains tax compliance. Visit http://www.hiscpa.com/checklist.html

Incorporating Your Issues for Your New Georgia Business Leadership

Knowing who will lead your business, their morals, beliefs and work ethic are essential to success in your new business venture. Determining who should be at the helm and who should follow will do much to avoid needless delays and time lost in aimless decision making. http://www.hiscpa.com/business-leadership.html

Incorporating the Details for Georgia Business Owners
Learning the basics of incorporation will do much to ensure that you do not make a costly mistake. Discovering the details of what all is involved in your new Georgia business will much to ensure you avoid costly mistakes and blunders. http://www.hiscpa.com/incorporating-details.html

To learn more about tax entities and the taxation thereof visit http://www.hiscpa.com/article2.html There you will also discover a wide host of resources for American Entrepreneurs.

A Christian CPA Firm: Never Underestimate the Long Term Benefits  www.HisCPA.com A Christian CPA Firm in Duluth GA Proudly Serving Suwanee, Lawrenceville, Snellville, Lilburn, Duluth, Norcross, Peachtree Corners, Atlanta, Gwinnett, Johns Creek, Roswell, Forsyth, Flowery Branch, Buford, Dunwoody, Grayson, Alpharetta, Roswell, Sandy Springs & Tucker as a Faith Based CPA

Duluth/Suwanee CPA: When is the Right Time to Incorporate Your Business?

How to Determine if You Have a Valid and Legal Business

Recently I received an inquiry from a taxpayer who acknowledged that on prior tax returns they had traded stocks for their own account and claimed business expenses on their Schedule C as part of their Form 1040. Claiming business expenses for a personal activity are not allowed as tax law defines items such as hobbies or similar like activities as personal in nature. To qualify as a legitimate business the purpose of the enterprise must be for the production of income, to serve other clients with the ultimate goal of making a reasonable profit and likelihood.

Incorporating 101: Georgia Incorporations

If you have started a new business and now need tax advice to take your business to the next level and to ensure that you set up as the correct/best legal entity type for your new Georgia business. Setting up your business as a corporation will do much to protect your personal assets from legal liability issues while potentially shrinking your overall year-end tax obligation while also providing benefits for yourself, as well as your employees. We are here to serve you as you make this important decision. For decades we have helped thousands pursue the dream of owning their own business and helping them understand and utilize the entity choice that is best-suited for their business.

Incorporating in Georgia: Incorporating in Georgia requires that you file for the company Articles of Incorporation with the Georgia Secretary of State’s Office. Corporations should also be sure to prepare a legal posting/announcement for the legally authorized newspaper in the county’s paper, establishing bylaws, election a Board of Directors, Officers and the issuance of stock.

Georgia Entity Requirements: Georgia law requires that you essentially disclose that entity type your business is as part of the name of the business such as adding to the end of your business name one of the below entity types. These names acknowledge to the public what entity type you have selected and for identification purposes with the Georgia Secretary of State. Types including Incorporated, Company, Inc., LLC, LLP.

Selecting a Name for your Georgia Business: Georgia law requires you to select a corporate/business name that is easily distinguishable from other names so that the public will be able to readily identify and recognize businesses from other companies.

Establishment of an Incorporator: Georgia law requires that as a business legally registering to transact business in the state have a named incorporator who is responsible for all of the initial incorporating paperwork. A company’s Articles of Incorporation should be included in the initial paperwork filed with the Secretary of State’s Office with the initial filing fees.

Corporate Directives/Setting up Your Corporate Bylaws: Over the years of serving Georgia business owners have often struggled with “what’s next” in the establishment and setting up of their new business. To help clarify and assist owners in addressing these issues, we work with taxpayers by providing the below Incorporating Checklist:

As a business owner it is prudent to have an annual Board of Directors, Officers, and Shareholder’s Minutes meetings and that each year you should pay the annual fee with the Georgia Secretary of State’s Office to renew your corporations annual registration. Please be aware that you need to get a business license and always list your corporate title when signing any agreement and conduct all corporate business in the corporate name.

Employee forms – W-4, G-4, and I-9 and independent contractor forms W-9. After they complete these forms, you should keep these in their permanent files. Employers should also be aware of the Georgia New Hire Reporting Act and forms relative to that information. Tax law requires all active employee owners to pay a fair and reasonable salary and it is prudent to retain a payroll service for your entire payroll and 1099 needs. Please be reminded that as long as you pay yourself a reasonable salary, you may also pay yourself shareholder distributions, which are devoid of FICA and Medicaid taxes. Per your advice you will not be required to file sales tax reports.

The following are recommendations to better manage your business including turning in a monthly expense report to the business and keep a daily log to track and support business miles. I suggest all business owners tax plan twice every year. Your U.S./IRS and Georgia corporate returns if you are a C or an S Corporation are due March 15th of each year. I suggest that all business owners consider a trademark to ensure that the name will always be yours.

There are many reasons a taxpayer may look to incorporate their business ranging from legitimacy, liability limitation and tax mitigation. Understanding these many nuances is your best first step in ensuring that you chose an entity type is best achieving success given your business model and operations. Entity selection is determinant on many issues ranging from citizenship, number of shareholders, ease of operation, tax obligations and year-end filings and even who your shareholders will be. Though many of these issues will conflict, working with a professional who is well versed in these issues will help you make the best election available for your new Georgia Business.

Choosing an Entity Type for Your New Business
Your initial choice of entity is perhaps the most important tax, financial and legal decision you might ever reach. Being well versed in these areas is essential to a wise and prudent decision. Visit http://www.hiscpa.com/article2.html

A Christian CPA Firm: Never Underestimate the Long Term Benefits www.HisCPA.com Incorporating in Georgia, Setting up an LLC in Georgia, Setting up an S Corporation in Georgia, Georgia Entity Selection, Converting Your GA LLC to an S Corporation, Converting Your GA C Corporation to an S Corporation, GA LLC, GA S Corporation and Converting Your Georgia Business to an S Corporation

Atlanta CPA: Incorporating in Georgia…What to Be Sure to Do

The Incorporating in Georgia Series

There are many reasons a taxpayer may look to incorporate their business ranging from legitimacy, liability limitation and tax mitigation. Understanding these many nuances is your best first step in ensuring that you chose an entity type is best achieving success given your business model and operations. Entity selection is determinant on many issues ranging from citizenship, number of shareholders, ease of operation, tax obligations and year-end filings and even who your shareholders will be. Though many of these issues will conflict, working with a professional who is well versed in these issues will help you make the best election available for your new Georgia Business.

At His CPA We Cover a Wide Host of Full Service CPA Firm Services Including:

Atlanta Tax Problems, IRS representation, Offer in Compromise

Incorporation in Georgia, Corporate and Personal Income Tax Returns

Atlanta Part-time CFO, Virtual Controller, Business Planning

Atlanta Bookkeeping & Financial Statements

-Made any Necessary Tax Elections. All newly incorporated business’s will need a new Federal Identification Number/EIN, which can be applied for on-line at www.irs.gov/ Also companies that desire to become an S Corporation/flow through entity for tax purposes must file IRS Form 2553: Election by a Small Business Corporation within 75 days of the beginning of the tax year to which you would like to become effective. When incorporating with the Secretary of State a company is initially a C Corporation and has to file the S Corporation paperwork to become an S Corporation. LLC’s who wish to become an S Corporation for tax purposes should also file this form within the time allotment referred to above.

On an ongoing basis also many business owners fail to:

-Have an Annual/ Periodic Board of Directors Meeting. All C Corporations and S Corporations are required by law to have an Annual/Periodic Board of Directors Meeting. Failure to do this may indicate a lack of the owners respect of the “corporate veil” thereby potentially impugning their rights of personal legal protection.

-Have an Annual/Periodic Shareholders Meeting. All C Corporations and S Corporations are required by law to have an Annual/Periodic Shareholders Meeting. Failure to do this may indicate a lack of the owners respect of the “corporate veil” thereby potentially impugning their rights of personal legal protection.

-Paid the Company’s Annual Registration Fee to the Secretary of State. Failure to pay this fee can result in your business being listed as a Non-Compliant Entity or worse yet Administratively Dissolved by the Secretary of State’s office. The registration form should be filed online at www.georgiacorporations.org/

-Maintain a Valid Business License. Business licenses are to be obtained from the county the business transacts business in/has a physical presence. If the business is located with a town’s city limits, then the license is procured from the city.

For all business’s before you incorporate, it is prudent to first talk with a Certified Public Accountant to ensure that you select the right entity type for your business. To gain a basic understanding of these nuances visit http://www.hiscpa.com/article2.html To read more about the incorporation process visit the Georgia Secretary of State at http://sos.georgia.gov/corporations/filing_procedures_corp_2001.pdf

His CPA (a Christian CPA firm)

Duluth/Suwanee CPA Proudly Serving Gwinnett for 30 Years and our Comprehensive List of Services

Contact John Dillard CPA at 770 814 9304 and let’s get started today.

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http://www.hiscpa.com/working-with-the-irs.html Atlanta Christian CPA on IRS Representation

http://www.hiscpa.com/paying-taxes.htmlGwinnett CPA on Paying Your Taxes and Extensions

http://www.hiscpa.com/avoiding-audits.html Duluth CPA on How to Avoid IRS Audits

http://www.hiscpa.com/offer-in-compromise.html Atlanta CPA Advises on Offer of Compromise, Back Taxes and IRS Problem Resolution

http://www.hiscpa.com/comparing-tax-methods.html Gwinnett CPA on National Sales & Flat Tax

http://www.hiscpa.com/article6.html Gwinnett CPA Advises on Tax Effects of Entity Choice

http://www.hiscpa.com/about_us.htm Providing Accounting and Tax Services to Georgia Businesses for Over Thirty Years

http://www.hiscpa.com/irs-representation.html Georgia IRS Representation, Offers in Compromise and Back Taxes

http://www.hiscpa.com/testimonials.htm What Clients of John Dillard, (An Atlanta Christian CPA) Have to Say

http://www.hiscpa.com/tax-services.html Georgia CPA Tax Preparation and Planning Services

http://www.hiscpa.com/what_we_do.htm Atlanta CPA Financial Accounting Services
for Small Business and Individuals

http://www.hiscpa.com/small_business_plans.htmlWriting Georgia Business Plans for Over 30 Years

http://www.hiscpa.com/marketing_plans.html Georgia CPA Helps with Business Marketing Plans

John Dillard is an author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (a Christian CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey.

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!”

Preparing the S Corporation Income Tax Return K-1 A Guide How to Guide to Prepare a K-1

www.HisCPA.com A Christian CPA Firm in Duluth GA Proudly Serving Suwanee, Lawrenceville, Snellville, Lilburn, Duluth, Norcross, Peachtree Corners, Atlanta, Gwinnett, Johns Creek, Roswell, Forsyth, Flowery Branch, Buford, Dunwoody, Grayson, Alpharetta, Roswell, Sandy Springs & Tucker as a Faith Based CPA

www.HisCPA.com A Christian CPA Firm in Duluth GA Proudly Offering Corporate and Personal Income Tax Returns, Offer in Compromise, Tax Advocacy, Tax Mitigation and Tax Compliance, Back Taxes, IRS Representation, IRS Appeals, IRS Collections, IRS Installment Plans & IRS Wage Levies

Duluth/Lawrenceville/Johns Creek CPA on Converting Your Georgia C Corporation or Georgia LLC to an S Corporation

Incorporating in Georgia

With changes over the last ten plus years in state law, more and more Georgia based businesses are incorporating as an LLC because of the ease of the initial set up of the business entity. However, frequently this may not be the best “tax choice” for the business as an LLC pays FICA and Medicaid taxes on all of its net earnings out of the business, whereas an active S Corporation owner will pay FICA and Medicaid taxes on its W-2. Tax law does require, however, that all S Corporation owners are to take a fair and reasonable salary given position and profit. Though the election is not in the best interest for all business’s as many LLC’s should stay an LLC for both legal and tax purposes, becoming an S Corporation is often a prudent decision for the following types of business:

-Trade Contractors such as builders, painters, landscapers, electricians, plumbers, etc.

-Retail shops such as boutiques, restaurants, clothing stores, furniture, appliances, video equipment, etc.

-Computer technicians such as contractors, retailers, repairs, programmers, etc.

-Sales Representatives including residential and commercial real estate agents, brokers, including those of most all types and territories.

-Distribution companies, resellers, wholesalers, and those in the distribution chain of a product of service.

-Service companies including consultants of all types, single owner physicians, dentists, doctors, chiropractors, etc.

C Corporations were once much more popular as an entity choice but as consumers and entrepreneurs became more aware and informed, C Corporations are much less pursued as a viable option as business owners sought to legally avoid the “double taxation” exposure of C Corporations as they are taxed first at the corporate level and then again at the personal level when monies are paid out of the corporation to the companies’ respective owners.

How S Corporations are Taxed

There is no income tax paid by as S Corporation when the annual tax return is filed to the IRS. However, as a part of the corporate return which is prepared, a Form 1120S, there is an attached schedule which shows each owners respective ownership percentage and via a Form K-1 for which each shareholder should reflect on their personal return. K-1 profits, losses, and shareholder distributions are all required by tax law to be issued based upon the each shareholders ownership percentage. In order for losses to be deductible a shareholder has to have a positive tax basis, which is a component of past profits, losses, and loans to and from the business. If a shareholder has no basis to cover losses reported on a K-1, they are by tax law considered to be “suspended losses” and can be rolled forward to future years when the shareholder has positive basis, which can be created by future years profits or the shareholder loaning money to the business.

An owner should report the K-1 profit, which is based upon their share of the business and not the amount of their shareholder distributions. This is a common misnomer about S Corporations and often leads to confusion for the new business owner. To that end it is best to remember that you pay taxes on the profits when you make them and not when you take them. For example generally speaking if your business nets $100,000 and you are the sole owner, you will pay taxes on $100,0000 whether you take zero dollar of shareholder distributions, a $100,000 or any number in between. Thus if you were to have a $100,000 profit in any given year and take no distributions then you would be able, absent any other issues, to take shareholder distributions in subsequent years with no additional tax responsibility as these monies would have already been taxed.

The rules of being an S Corporation are only four and many businesses will qualify. To be an S Corporation you must have:

• Have a December 31st year-end.
• Have less than 100 shareholders.
• Shareholders have to be U.S. citizens or resident aliens.
• Only one class of stock

For LLC’s that change from an LLC for legal purposes to an S Corporation for tax purposes, the LLC remains an LLC with the Georgia Secretary of State along with all other legal purposes. Thus, your LLC makes solely a tax election which affects none of the other contracts, licenses, trademarks, legal filings, and legal obligations of the LLC.

Contact HIS CPA PC (A Christian CPA Firm) today.

To learn more about tax entities and the taxation thereof visit http://www.hiscpa.com/article2.html There you will also discover a wide host of resources for American Entrepreneurs

www.HisCPA.com Incorporating in Georgia, Setting up an LLC in Georgia, Setting up an S Corporation in Georgia, Georgia Entity Selection, Converting Your GA LLC to an S Corporation, Converting Your GA C Corporation to an S Corporation, GA LLC, GA S Corporation and Converting Your Georgia Business to an S Corporation

Duluth/Suwanee CPA Helps New Georgia Business Get Started on the Right Financial Footing: Incorporating in Georgia

Recently I had the below inquiry from our website. Desiring first to serve we focus on Serving the Atlanta Business Community even before they become clients:

We are a new business just outside Atlanta and are seeking a solid Business CPA to help us with our business, tax, and licensing issues. We are just getting our business started and want to ensure that we get it off on the right foot. We would appreciate your guidance in this area and look forward to hearing from you soon and all about of your payroll tax and withholding issues.

Below is our response designed to assist and serve others in our community and beyond:

Thanks for visiting www.HisCPA.com I would welcome as you begin your new business and to ensure that you are aware of and correctly apply all business tax, and licensing issues. As payroll is perhaps the largest most difficult of administrative issues for business owners to address, I suggest all business owners utilize the services of a payroll company to assist and to write a monthly paycheck.

For the other issues please feel free to give me a call and I will be happy to assist. John Dillard CPA, 770 814 9304.

Getting your Newly Formed Business Incorporated in Georgia started off on the right foot is essential to prudence and good business planning when starting a new business venture.

Getting Your New Georgia Business Started
Understanding many of the basics of the start of the incorporation process will do much to ensure that you are well-versed and able to make wise and informed decisions. As these issues will affect your business operations and finances during the lifetime of your business they are essential to getting started well. Go to http://www.hiscpa.com/incorporating-guide.html

Determining Where Incorporate Your New Geogia Business
The decision of where to incorporate your business is a critical component of getting your business started. Learn what you need to know to make a well-informed decision. See http://www.hiscpa.com/incorporating.html

Gerogia Corporation Forms and Registrations Checklist
Whether you are just incorporating or have been in business for years. This summary will enable you to quickly locate the forms and guidance you need to ensure your business maintains tax compliance. Visit http://www.hiscpa.com/checklist.htm

Incorporating Your Issues for Your New Georgia Business Leadership Knowing who will lead your business, their morals, beliefs and work ethic are essential to success in your new business venture. Determining who should be at the helm and who should follow will do much to avoid needless delays and time lost in aimless decision making. http://www.hiscpa.com/business-leadership.html

Incorporating the Details for Georgia Business Owners
Learning the basics of incorporation will do much to ensure that you do not make a costly mistake. Discovering the details of what all is involved in your new Georgia business will much to ensure you avoid costly mistakes and blunders. http://www.hiscpa.com/incorporating-details.html

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