Business Formation
The most frequently asked tax questions related to Business Formation
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 there citizen requirements for LLC's?
Asked Tuesday, January 03, 2012 by an anonymous userCPA Answer:
No. There are no citizen requirements for LLC's, Limited partnerships, Sole Proprietorships or S Corporations. There are citizen requirements for S Corporations.
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.
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.
Sole Proprietorship - Schedule C
What are some advantages and disadvantages of selecting to be a Sole Proprietor compared to other entities?
Asked Thursday, December 22, 2011 by an anonymous userCPA Answer:
Some advantages are: it has minimum legal restrictions; and is easy to discontinue. Some disadvantages are: unlimited liability; your income tax cannot be deferred by retaining profits; and you may not bring in new owners or outside capital contributions. Speak to your local CPA to determine the best entity choice for your needs.
Advantages and disadvantages - S Corporation compared to other entities
Asked Thursday, December 22, 2011 by an anonymous userCPA Answer:
Some advantages are: there is limited liability; and the entity avoids double taxation of profits as is the case with C Corporations.
The profits that are passed through to the shareholders are not subject to SE tax as in a partnership.
Some disadvantages are: that the shareholders pay tax on earnings even if they are undistributed; the contributions limits to a qualified retirement plan are based on shareholder/employee wages, not the overall profits as with a Sole Proprietorship.
The profits that are passed through to the shareholders are not subject to SE tax as in a partnership.
Some disadvantages are: that the shareholders pay tax on earnings even if they are undistributed; the contributions limits to a qualified retirement plan are based on shareholder/employee wages, not the overall profits as with a Sole Proprietorship.
What are some advantages and disadvantages of selecting to be a Partnership compared to other entities?
Asked Thursday, December 22, 2011 by an anonymous userCPA Answer:
An advantage is that it is a way to combine the financial abilities and skills of several different people. Some disadvantages are that the general partners are liable for the actions of the other partners and a partnership is not that easy to get out of. Speak to your local CPA about selecting the best entity for your purposes.
What are some advantages and disadvantages of selecting to be a (LLC) Limited Liability Company compared to other entities?
Asked Thursday, December 22, 2011 by an anonymous userCPA Answer:
Some advantages are that it avoids certain S corporation restrictions. It also avoids double taxation of profits.
Some disadvantages are that it is currently considered a relatively new business entity with little case law or regulatory law currently available.
There is inconsistent treatment from state to state. The entity must have at least 2 owners.
Speak to your local CPA about determining the best entity choice to fit your needs
Some disadvantages are that it is currently considered a relatively new business entity with little case law or regulatory law currently available.
There is inconsistent treatment from state to state. The entity must have at least 2 owners.
Speak to your local CPA about determining the best entity choice to fit your needs