Atlanta CPA: Want to Know if Your LLC Should Convert to an S Corporation for Tax Purposes?

Tuesday, May 31st, 2011

Atlanta CPA: Want to Know if Your LLC Should Convert to an S Corporation for Tax Purposes?

Is a Limited Liability Company the Right Entity Selection for Your Business?

Do You Need a CPA to Help You Through the Maze of Tax Law?

As a Christian Faith Based CPA firm, we seek to serve you the way God would, if He was a CPA. The below is a sample letter we might use to send to a client to help them with important tax issues for their newly incorporated business:

It was great to meet you today. 

Below is some information on the issues of converting your LLC to an S Corporation for tax purposes. 

If you would like to go forward with this please send along a copy of your incorporation papers and your last filed personal return and I will get it completed. 

I look forward to serving as your CPA for many years to come. 

LLC’s can Legally Convert to an S Corporation 

Legal Liability Companies came in vogue approximately twenty years ago when the state of 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.  

The IRS 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.  

Each and every business is 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.  

 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.   

Atlanta Part-Time Virtual CFO  http://www.youtube.com/watch?v=ZDEgIDuDv_g&feature=mfu_in_order&list=UL 

Visit us online at www.HisCPA.com   A Christian Atlanta CPA Firm 

Need Help With Your Atlanta Financial Statements or Bookkeeping?  http://www.youtube.com/watch?v=PhpMHlJ2Fbw

His CPA PC…A Christian Atlanta CPA Firm: Never Underestimate the Long Term Benefits Serving Metro Atlanta as a CPA for Decades  www.HisCPA.com

Serving Atlanta, Duluth, Gwinnett, Barrow, Bartow, Carroll, Cherokee, Clayton, Coweta,  Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry, Newton, Paulding, Pickens, Rockdale, Walton, Barrow, Bartow, Carroll, Henry, Newton, Bartow, Walton, Rockdale, Barrow, Spalding, Coweta, Dawson, Douglas, Fayette, Newton, Paulding, Spalding, Walton, Henry, Paulding, Douglas, Coweta, Canton, Covington, Douglasville, Druid Hills, East Point, Forest Park, Griffin, Lithonia, Mableton, McDonough, Milton, Mountain Park, Newnan, Powder Springs, Stockbridge, Union City, Villa Rica, Winder, Woodstock,  Smyrna, Sandy Springs, Marietta, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Atlanta, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Lake Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, Atlanta GA, Gwinnett County, North Fulton County, Cherokee County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Atlanta, Alpharetta, Johns Creek, Lawrenceville, Marietta, Milton, Norcross, Snellville, Roswell, Buford, Smyrna, Marietta, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain, Decatur. Sandy Springs, Peachtree City, Douglasville, Newnan, Griffin, Woodstock, Carrollton, Forest Park, Canton, College Park, Cartersville, McDonough, Riverdale, Fayetteville, Covington, Stockbridge, Conyers, Clarkston, Barrow, Bartow, Butts, Carroll, Cherokee, Clayton, Coweta, Dawson, and Douglas.

 

 

 

Posted in Business/Tax Consulting, Financial Planning, Business Loans & Money Management, Income Tax Preparation of Corporate & Personal Income Taxes, Incorporating in Georgia & Entity Selection | Comments Off

Award Winning CPA Asks: Is 2011 the Year Your LLC Converts to an S Corporation for Tax Purposes?

Monday, January 31st, 2011
Award Winning CPA Asks: Is 2011 the Year Your LLC Converts to an S Corporation for Tax Purposes? 

LLC’s can Legally Convert to an S Corporation by the timely filing of IRS Form 2553 or by being aware of the tax rules regarding the filing thereof. Limited Liability Company legislation was passed in Georgia approximately two decades past. Though 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.  

Per IRS legislation 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. 

 Each and every business is unique and therefore all saving opportunities are different. But even the smallest of businesses with the smallest of profits may save tax dollars by converting from an LLC to an S Corporation.  

To qualify to be an S Corporation you are required to:

-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. 

 His CPA PC provides 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.  

John Dillard, CPA of His CPA, PC (An Atlanta CPA firm) 1940 Woods River Lane, Duluth, GA 30097 Phone 770-814-9304 http://www.hiscpa.com/   Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, Cherokee County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Marietta, Milton, Norcross, Snellville, Roswell, Buford, Smyrna, Marietta, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain, Decatur. Sandy Springs, Peachtree City, Douglasville, Newnan, Griffin, Woodstock, Carrollton, Forest Park, Canton, College Park, Cartersville, McDonough, Riverdale, Fayetteville, Covington, Stockbridge, Conyers, Clarkston, Barrow, Bartow, Butts, Carroll, Cherokee, Clayton, Coweta, Dawson, Douglas, Fayette, Forsyth, Fulton, Haralson, Heard, Henry, Jasper, Lamar, Meriwether, Newton, Paulding, Pickens, Pike, Rockdale, Spalding, Walton, Canton, Covington, Douglasville, Druid Hills, East Point, Forest Park, Griffin, Lithonia, Mableton, McDonough, Milton, Mountain Park, Newnan, Powder Springs, Stockbridge, Union City, Villa Rica, Winder and Woodstock.

Posted in Business/Tax Consulting, Financial Planning, Business Loans & Money Management, Financial Statements & Bookkeeping, Incorporating in Georgia & Entity Selection | Comments Off

Atlanta CPA on S Corporations…Is the S Corporation Status Election the Best for Your Business

Monday, January 19th, 2009

Atlanta CPA on S Corporations…Is the S Corporation Status Election the Best for Your Business

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 profits 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.

Although most states recognize and reflect the same tax treatment for S Corporations as the IRS and charge a relatively insignificant net worth tax such as Georgia, there are many states which charge a franchise tax as well.

To read more and see which entity type is best for you visit http://www.hiscpa.com/article2.html

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond.

 

John Dillard CPA of His CPA PC  (a Christian CPA firm) 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/ 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!”

 

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.

(Proudly Serving Atlanta and Duluth for Over Twenty Years)  

Posted in Business/Tax Consulting, Financial Planning, Business Loans & Money Management, Financial Statements & Bookkeeping, Incorporating in Georgia & Entity Selection | Comments Off