Business Formation
The most frequently asked tax questions related to Business Formation
What are some disadvantages of selecting to be a Partnership compared to other entities?
Asked Tuesday, January 03, 2012 by an anonymous userCPA Answer:
Just as in a sole proprietorship, partners are still responsible for unlimited liability, both personal and business. Therefore, everything you own is at risk. Also, you cannot make certain important business decisions without the agreement of the partner.
A general partnership offers few tax benefits to business owners.
Can I use my passive K-1 loss to offset my interest income
Asked Tuesday, January 03, 2012 by an anonymous userCPA Answer:
Generally not. Interest income is defined as portfolio income, not passive income. Portfolio income includes interest, dividends, and gains on the sale of investment property. Passive K-1 losses can only be used to offset other passive income, except when the $25,000 special loss allowance for persons with active participation in rental real estate entities can be utilized.
Are the K-1 losses that were limited by the "At-risk" rules lost?
Asked Tuesday, January 03, 2012 by an anonymous userCPA Answer:
No. The K-1 disallowed losses due to the At Risk limitation rules are not lost and can be carried over and may be deductible in future years. The term "At risk" means the exposure to the danger of economic loss. A person can claim a tax deduction in a limited partnership up to the amount he or she is at risk if the taxpayer can show it is at risk of never realizing a profit and of losing its initial investment
Can my K-1 loss from my PTP offset other K-1 income?
Asked Tuesday, January 03, 2012 by an anonymous userCPA Answer:
NO. PTP (Publically Traded Partnership) losses can only be used to offset income from that specific PTP.
It cannot be used to offset income from other PTPs or other K-1 entities.
It cannot be used to offset income from other PTPs or other K-1 entities.
How does a Single Member LLC file its tax return?
Asked Tuesday, January 03, 2012 by an anonymous userCPA Answer:
A single member LLC files as a disregarded entity on a Schedule C. It does not file as a Form 1065 Partnership tax return.
Are the LLC owners liability limited?
Asked Tuesday, January 03, 2012 by an anonymous userCPA Answer:
Yes. LLC's have similar liability limits as do C or S Corporations.
Sole Proprietorships and Limited Partnerships are personally liable for business liabilities.
Can a LLC be owned by another business?
Asked Tuesday, January 03, 2012 by an anonymous userCPA Answer:
Yes, An LLC and a C Corporation may be owned by another business instead of individuals. S Corporations, Limited parnerships and Sole Proprietorships cannot be owned by other businesses.
Is there a limit on the number of owners a LLC has?
Asked Tuesday, January 03, 2012 by an anonymous userCPA Answer:
No. There is no limit on the number of owners (members) for a LLC or a Limited partnership or a C Corporation. There are limits for S Corporations and Sole Proprietorships.
Does a LLC report its profit or loss on its personal tax return?
Asked Tuesday, January 03, 2012 by an anonymous userCPA Answer:
A LLC similar to S Corporations, Limited partnerships and Sole Proprietorships report theor profit or losses on there personal tax returns.