Accounting News and Notes

Atlanta CPA Advises on Whether Your Georgia LLC Should Convert Over to an S Corporation for Tax Purposes

If You Have Just Incorporated in Georgia

Today I both met with a real estate broker and spoke with a distributor who were evaluating on whether or not to convert their LLC over to an S Corporation for tax purposes. For business owners who qualify to be an S Corporation, this is often a prudent and tested technique. To be an S Corporation you have to have a December 31 year-end, have less than an 100 shareholders and all of your owners have to be either U.S. citizens or resident aliens.

Small Business Election: Filing Form 2553

Whether you have just incorporated and you have had an LLC for years. It is prudently evaluate your tax election and to ensure that your entity selection is right for your business. If it is not we can convert your Georgia Business to a  Georgia S Corporation by filing Form 2553: Election by a Small Business Corporation. S Elections have been for decades required to be filed within either seventy-five days of the beginning of a tax year or within 75 days of the incorporation date, if a new corporation. For example, if you are a new business and incorporate on 3-1-09 then you would have 75 days from 3-1-09 to file the S Corporation for it to be timely. Similarly, if you are a C Corporation or an LLC and wish to become an S Corporation for the 2009 tax year then you would have 75 days or until March 15, 2009 to file for a timely election. However if you have missed this deadline the IRS has allowed business owners still to gain a “current” tax entity selection; please be sure to work closely with your CPA to ensure that this is done correctly.

For an LLC that converts to an S Corporation for tax purposes, it remains an LLC for all other issues thus maintaining the advantages initially desired. When an LLC changes over to an S Corporation all active employee/owners are required to take a fair and reasonable salary. The best test of a reasonable salary is what an owner would have to pay someone else to perform their position and it is a function of their position, responsibilities, and the business’s profit. If an LLC converts over to an S Corporation for tax purposes its federal and state income taxes will remain essentially the same. However, an LLC pays FICA & Medicaid taxes on all of its net earnings/earned income whereas an S Corporation will be obligated solely on its salary/W-2 wages.

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.

John Dillard is an Christian Speaker/Author and an Atlanta CPA. 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 and a Voice of One: Nehemiah’s Prayer visit http://www.john-dillard.com/ or call John Dillard CPA today at 770.814.9304 (All Rights Reserved) Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!  

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

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, Offer in Compromise, Back Taxes, Bookkeeping.

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.

Atlanta CPA on Determining if You Should Convert Your GA LLC Over to a GA S Corporation 

One of our past inquiries to our web site was regarding entity selection issues and their judicious application. Below is the inquiry we received:

I am starting a new S Corp (changing from LLC) and need to gain a business bank acct and make sure many of my forms are filled out correctly.  Also need to find an accounting way to invoice clients. Also, will need to file for sales tax collection as we are soon to have retail  sales. Feel free to call me any time.

Though many taxpayers come prepared with their own answer for me to supply them, it is necessary for the CPA to be a quick study and to address their individual needs both accurately and succinctly. To this end I prepared the below response:

There is perhaps no larger area of confusion in tax law nor one, which will dramatically affect your total tax bill as tax entities are taxed in several different ways.  Understanding these nuances is next to impossible, absent the technical training and experience necessary. To help unravel this mystery we work with taxpayers by providing information that is both insightful and useful.

At  http://www.hiscpa.com/article2.html you will find a narrative that will do much to enlighten you as to the many variables affecting entity selection for your Georgia based business. In this article you will find many of the rules and regulations regarding entity selection in a straight-forward style which is easy to both digest and understand. Also at  http://www.hiscpa.com/article6.html you can find an actual example of how entities are taxes and the nuances thereof. We have found over the years that having a sample or illustration does much to remove the mystery of entity taxation issues.

Generally both S Corporations and LLC’s will pay the same federal and state income tax. However the nuances exist in the area of payroll taxes and self-employment taxes and the filing of the actual year-end tax returns for each entity. If you quality to be an S Corporation, your LLC can legally convert to an S Corporation for tax purposes, while your LLC would remain such for legal purposes. Often LLC’s who transact such an election may save thousands annually in unnecessary taxes being paid . To learn more visit http://www.hiscpa.com/blog/2008/10/02/flow-through-entities-s-corporations-vs-llcs/ 

We are committed to living out the “Golden Rule” of treating our clients as our friends and giving the best service possible. Our goal of Serving Him as We Serve You, will help you receive the very best advice we can provide. I would welcome meeting to get started and I have time openings later this week and please note: our initial thirty minute consultation is free.

John Dillard is an Christian Speaker/Author and Certified Public Accountant in Duluth, GA. 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 and a Voice of One: Nehemiah’s Prayer visit http://www.john-dillard.com/ or call John Dillard CPA today at 770.814.9304 (All Rights Reserved) 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, Offer in Compromise, Back Taxes, Bookkeeping.

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

Atlanta CPA Advises on Completing the Election by a Small Business Corporation and Form 2553

Beginning with the 2009 filing season for 2008 S Corporation Income Tax Returns, the IRS has just made the process easier for those who inadvertently the election late. For years the S Corporation Election, or Form 2553, was to be file within seventy five days of the first day or beginning of the tax year to which a electing corporation desires to make it effective. For example, if you are a brand new corporation who just incorporated on June 1, 2008, then you would have seventy five days from 6-1-08 to make the election. Similarly if you were a corporation that had been a C Corporation for years and would like to be an S Corporation for the 2008 tax year, then under the old rules you would have had to made the election by March 15th or seventy-five days after 1-1-08.

Starting 1-1-08, if you qualify, corporations who neglect to have satisfied the old 75 day requirement can still do so if they qualify. To be an S Corporation you have to:

-Have only Resident Aliens or U.S. citizens as shareholders.

-Generally have a calendar year-end.

-Have less than one hundred shareholders.

-Have one class of stock.

Under the new rules a company desiring to be a S Corporation can elect to do so with the filing of their Corporate Return, Form 1120S, as long as:

-They attach a properly Form 2553, Election by a Small Business Election including the effective date of the election, signed approval of all of the company’s shareholders.

-They attach a reasonable cause for the late election.

-Form 1120S is filed either by the original due date or plus the automatic six month extension, if timely elected.

-None of the shareholders have filed their personal returns showing reflecting that the company is not an S Corporation.

Please note that similar relief is available for an entity eligible electing to be treated as a corporation, such as an LLC converting from a partnership to a corporation for tax purposes.

Generally speaking the IRS will respond to S Election request within sixty days of their original filing. For those not receiving their acceptance on a timely basis you can call the IRS at 800.829.4933. If a company fails to meet the new relaxed filing requirements for S Corporation status, they can still request a Private Letter Ruling and pay a user fee.

John Dillard is a Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta  CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304.

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

What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31

Why are these verses here? Learn how HIS CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html

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, Offer in Compromise, Back Taxes, Bookkeeping.

LLC’s can Legally Convert to an S Corporation Saving Thousands Annually

LLC’s came in vogue approximately fifteen years ago when the the state of Georgia enacted legislation allowing both LLC’s (Limited Liability Company’s) 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 have been incurred if the business is 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 these taxes reflected on W-2’s. Tax law allows an LLC to legally convert over to being an S Corporation, for tax services,  as long as all active employee/owners pay their-selves 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.

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.

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.