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Archive for the ‘Taxes for Sole Proprietors’ Category

Hiring Your Spouse & the Shellito Case

Question: which of the following statements about the corporate form of business?

which of the following statements about the corporate form of business organization is true?

a.the corporate form has the disadvantage of double taxation relative to a solve proprietorship
b. the corporate from has the advantage of unlimited liability
c.the corporate form is preferred over the sole proprietorship because a corporation is easier to form and faces less regulation
d. sole proprietorship are the most common form of business organization because liability is limited to the amount invested in the business by the sole proprietor.

Answer: A

Business buzz

Robert E. Smith Jr. has been promoted to director of planning for the city of Montgomery.

Business Entities – Sole Proprietorship

Question: If I start my Own company Is an LLC the way to go?

Im going to start a small business as a general contractor, Doing small remodels, home repairs and maintenance. I will be the only employee anyone else will be contracted, Whats the best way to go Sole Proprietor or LLC? Does operating as an LLC make doing taxes more difficult? Will my insurance rates be different even though the business structure is the same?

Answer: As others pointed out, setting up a separate entity (LLC or corporation) does help to limit your liability. HOWEVER, it will NOT protect you in the case of negligence. Even a corporation won’t protect you in that case.

As for taxes, the IRS does not recognize the LLC form so you have to elect how you report the business’ activity. If it is a single member LLC (only you and no one else as shareholders), you can elect to report the activity on the Schedule C (sole proprietor on 1040). If there are more than one member, you must elect a different form, such as 1065 (partnership) or 1120/1120S (corporation/sub-chapter S corporation).

As for “anyone else will be contracted”, you need to review the IRS guidelines regarding what constitutes a sub-contractor. The IRS is cracking down on companies (especially construction) that skirt the payroll laws by classifying workers as sub-contractors. The “employee” can file Form SS-8 which asks the IRS to step in and determine their status. Also, the state’s department of industrial accidents will shut you down if you do not include subcontractors on your workers comp insurance or have proof they have their own.

Answers to Your Tax Questions

David Cay Johnston answers your questions about the new tax law.

WILLIAM VILLARICA PAWNSHOP OWNER BUYS P26 MIL LAMBORGHINI YET NOT PAID INCOME TAXES FOR 8 YRS

Small-business owners avoid tax season panic

NEW YORK — Here are some comforting words for small business owners: It’s not inevitable that you’ll have a tax season panic attack. Planning now will make the process of completing and filing your tax return less of an ordeal.

IRS Extension Saves Money!

Question: How to Transer Property from Sole Proprietor Sch. C to LLC 1065?

A company purchased a building in 2005 and claimed it on their schedule C and took 1st year depreciation.
They formed an LLC in 2006 and transferred building to LLC. Now sole prop. rents building from LLC. (pays themselves rent)
How would you go about filing the 2006 tax return, and taking the building off the Schedule C depreciation, and putting on the 1065 of the new LLC?
Would there be depreciation recapture? Or would they get to take year 2 depreciation on a 1st year LLC?
This situation takes the cake!!!
Any help appreciated!

Answer: I would use the adjusted basis (cost less year 1 depreciation) of the building and depreciate this amount on the 1065. Basically continue to depreciate the building, taking “year 2″ depreciation on the first 1065 tax return. My reasoning is that the net income from the partnership is ultimately ending up in the same place – the sole proprietor’s individual tax return. The sole proprietor already took a deduction for year 1 depreciation, so he would not be entitled to it again. There would not be any depreciation recapture.

Who’d get hit with a tax hike: small business or the rich?

Most of the businessmen in the two top income brackets are not the lawyer or corner grocer who files Schedule C.

Business Strategies : Advantages of Sole Proprietorship