Example of S Corporation Companies
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New Tax Law: Issues for Partnerships, S Corporations, and Their Owners
New Tax Law: Issues for Partnerships, S corporations, and Their Owners January 18, 2018 1 Introduction H.R. 1, originally known as the “Tax Cuts and Jobs Act,” was signed into law on December 22, 2017. The legislation significantly changes how individuals, businesses in all industries, multi-national enterprises, and others are taxed. KPMG has prepared a 167- page report [PDF 1.4 MB] that summarizes and makes observations about the many tax law changes in H.R. 1, including permanent reduction of the corporate tax rate to 21% and mandatory repatriation of previously deferred foreign income. This report focuses on tax law changes impacting partnerships, S corporations, and their owners. Among other significant changes, H.R. 1 includes a new 20% business deduction that applies to certain partners and S corporation shareholders and new carried interest rules. This report is one of a series that KPMG has prepared as tax reform legislation has moved through various stages of the legislative process. To read KPMG’s reports and coverage of legislative developments, see TaxNewsFlash-Tax Reform. Documents The JCT provided estimates of the budget effects of the conference agreement on H.R. 1. Read JCX-67-17 Read JCX-68-17 (Distributional Effects of the Conference Agreement for H.R. 1) Read JCX-69-17 (Macroeconomic Analysis of the Conference Agreement for H.R. 1) © 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. -
Business Entities Education Materials
Business Entities EDUCATION MATERIALS NO BENEFIT DELAY IN CLAIM PAYABLE DETERMINATION UNDERINSURANCE s g n i s n e ar o e d n n i n io o at LACK OF ti u i t n s c d i g lu re d f e INSURANCE e n f e i s d s d ’ i s s n r s r s y e u a a n e c e n o c p s c i y d o l w t r e d h t O o p t c t e n n o o p s e x n e l m s a e t s s c ’ r r a u n i e t F n p a w c t O d o e n d u l s c s n a i l t c o e n l er ib n g N w li O e in N With our help, business owners can navigate through potentially treacherous waters. These Materials and the documents within the Materials are the sole and exclusive property of Union Security Insurance Company. Any unauthorized use, reproduction, or distribution of these copyrighted materials is strictly prohibited without the express, prior written consent of Union Security Insurance Company. © Union Security Insurance Company, 2012. Disclaimer: These materials are made available for information purposes only. These materials are designed to provide general information with respect to certain types of business entities and certain aspects of those business entities. No representation is made that the information provided is comprehensive or anything more than an overview. -
Model S Corporation Income Tax Act
American Bar Association Section of Taxation Committee on S Corporations Subcommittee on the State Taxation of S Corporations June 1989 (Revised) Model S Corporation Income Tax Act Recommended (with Six Proposed Modifications) to the States by the Multistate Tax Commission, August 2, 1991 I. BASIC PROVISIONS SECTION 1000. TITLE; DEFINITIONS; FEDERAL CONFORMITY; CONSTRUCTION (a) The title of this Part shall be the [name of State] S Corporation Income Tax Act. (b) For purposes of this Part, the following terms shall have the following meanings: (1) C Corporation: a corporation which is not an S Corporation. (2) Code: the Internal Revenue Code of 1986, as amended and as applicable to the Taxable Period; references to sections of the Code shall be deemed to refer to corresponding provisions of prior and subsequent federal tax laws. (3) Income Attributable to the State: items of income, loss, deduction or credit of the S Corporation apportioned to this State pursuant to [Section number—business income apportionment provision] or allocated to this State pursuant to [Section number— nonbusiness income allocation provision]. (4) Income Not Attributable to the State: all items of income, loss, deduction or credit of the S Corporation other than Income Attributable to the State. (5) Post–Termination Transition Period: that period defined in Section 1377(b)(1) of the Code. (6) Pro Rata Share: the portion of any item attributable to an S Corporation shareholder for a Taxable Period determined in the manner provided in, and subject to any election made under, Section 1377(a) or 1362(e), as the case may be, of the Code. -
REAL LIFE EXAMPLE: Transferring Wealth with Business Interests
REAL LIFE EXAMPLE: Transferring Wealth with Business Interests by Bill Russell, Partner A FREEBORN & PETERS WHITE PaPER ABOUT THIS WHITE PAPER: ears ago, Peter Patriarch started a business in pet supplies. Over time his business has continued to grow in value and has Despite the easing of estate become quite successful. Sales continued to surge, rebounding taxes on many taxpayers, from the 2009 recession, and, by 2012 the business had many family-held businesses Yconsiderable value. continue to be burdened with large potential transfer Peter’s son, Paul, participates in the business as one of its leaders. In the taxes. This article is a real-life very early years, Peter had given Paul 10% of the company when it was story (with names changed) worth little. By 2012, Peter realized that he faced a significant estate tax of how one family business burden in leaving the remaining 90% of the company to Paul and his family. That tax burden (40%) was increasing everyday with the ongoing growth of successfully addressed this the business. In 2012, Peter decided to shift ownership so that this ongoing problem. growth would be out of his estate. At the same time, Peter was not ready to give up control of the company. The following is the actual steps that were taken by Peter to shift that wealth in a tax efficient manner. While the names have been changed, and the figures and structure have been simplified, the following example substantially reflects the real life facts. Peter’s company is an S corporation owned 90% by Peter and 10% by his son, Paul. -
State Architects Licensure Board
Revised 06.18 STATE ARCHITECTS LICENSURE BOARD MAILING ADDRESS COURIER ADDRESS PHONE 717-783-3397 State Architects Licensure Board State Architects Licensure Board FAX 717-705-5540 P.O. Box 2649 2601 North Third Street E-MAIL [email protected] Harrisburg, PA 17105 Harrisburg, PA 17110 WEB www.dos.pa.gov/arch AMENDMENT APPLICATION FOR FIRM REGISTRATION Before completing this application, make sure this is the most recent version by comparing it with the one posted on the Board’s website. The date is located in the upper left hand corner. Instructions and Requirements An individual architect or a group of architects may practice architecture in Pennsylvania in one of the following forms of architectural firms: Sole Proprietorship; Partnership; Professional Association; Professional Corporation; Business Corporation; Limited Liability Company; Limited Liability Partnership. 1. A Sole Proprietorship must meet the following criteria: • The owner is a licensee of the Board. Documents needed from the Pennsylvania Corporation Bureau: a) If the sole proprietorship is doing business under a fictitious name, please include a photocopy of the approved fictitious name registration. The applicant’s personal name must specifically appear on the fictitious name registration. 2. A Partnership must meet the following criteria: • At least two-thirds of the partners are licensed in a state to practice architecture, engineering or landscape architecture. • At least one-third of the partners is licensed in a state to practice architecture. • At least one partner is a licensee of the Board. Documents needed from the Pennsylvania Corporation Bureau: a) For Pennsylvania partnerships - provide a photocopy of the approved certificate of registration. -
Transfer Instructions for Privately Held Stock
IT’S YOUR LEGACY. EXPLORE IT. TRANSFER INSTRUCTIONS FOR PRIVATELY HELD STOCK 1. The donor should provide information as to whether the company is a C corporation or an S corporation. If the company is an S corporation, additional analysis will be necessary before the Foundation can determine if it will accept the stock. The additional issues to be analyzed in connection with a proposed gift of S corporation stock are summarized in paragraphs 10 – 16 below. 2. Generally, a written appraisal is needed for non-cash gifts of $5,000 or more. However, if the CAL POLY non-cash gift is non-publicly traded stock, the applicable threshold is $10,000. Office of Gift Planning 3. The instructions for IRS Form 8283 set out the appraisal requirements in general. If an appraisal is needed, the donor must obtain a qualified appraisal by an independent third party CONTACT US to determine the value of the property at the time the gift is made. The appraisal must be prepared, signed and dated by a qualified appraiser; prepared not more than 60 days prior to 1 Grand Avenue the contribution; and not involve a prohibited type of appraiser fee. The donor’s accountant San Luis Obispo, CA may be a good resource to obtain a referral for an appraiser. The appraisal must be delivered 93407-0444 to the donor before the due date (including extensions) of the return on which the donor will 800-549-2666 | 805-756-7125 first claim a deduction for the stock. If a deduction is first claimed on an amended return, the appraisal must be received before the date the amended return is filed. -
When Subchapter S Meets Subchapter C Martin J
University of Florida Levin College of Law UF Law Scholarship Repository UF Law Faculty Publications Faculty Scholarship Winter 2014 When Subchapter S Meets Subchapter C Martin J. McMahon Jr. University of Florida Levin College of Law, [email protected] Daniel L. Simmons Follow this and additional works at: http://scholarship.law.ufl.edu/facultypub Part of the Corporation and Enterprise Law Commons, and the Tax Law Commons Recommended Citation Martin J. McMahon, Jr. & Daniel L. Simmons, When Subchapter S Meets Subchapter C, 67 Tax Law. 231 (2014), available at http://scholarship.law.ufl.edu/facultypub/621 This Article is brought to you for free and open access by the Faculty Scholarship at UF Law Scholarship Repository. It has been accepted for inclusion in UF Law Faculty Publications by an authorized administrator of UF Law Scholarship Repository. For more information, please contact [email protected]. When Subchapter S Meets Subchapter C MARTIN J. MCMAHON, JR.- & DANIEL L. SIMMONS" ABSTRACT It is often said that "an S corporation is a corporation that is taxed like a partnership." This statement is incorrect. An S corporation resembles a part- nership only in that it generally does not pay income taxes and its income and losses pass through to the shareholders and retain their character as they pass through. Also, like a partnership, basis adjustments to an S corporation share- holder's stock reflect allocations of income, expense, loss, and distributions. However, no other rules of subchapter K governing partnership taxation apply to S corporations. Most of the rules governing the relationship between an S corporation and its shareholders differ significantly from the rules gov- erning the relationship between a partnership and its partners. -
Law Matters for Design Professionals
LAW MATTERS FOR DESIGN PROFESSIONALS Forming an Architecture Firm in New York Did you just get licensed in New York and want to open your own firm? Or you just landed a great project to motivate you to finally start your own company? Before you start building your amazing new practice, there are some New York-specific rules you should know about! Can I name my firm whatever I want? That depends. The NYS Education Department (NYSED) requires architecture firms to have the word “architect,” “architects” or “architecture” in the name. Even if you want to file for an alternative name (such as “doing business as”, “d/b/a,” “also known as”, “a/ka”, or even just an abbreviated name), that alternative name must still include the word “architect,” “architects” or “architecture.” And, if the name you choose includes initials, foreign words, surnames, abbreviations or “uncommon” words, the NYSED will probably ask you to explain them. If you’re forming a design professional corporation or professional corporation, your corporate name must include periods (D.P.C. or P.C.). Also, while you may have the utmost confidence in your professional services, you cannot include claims of superiority in your firm name; terms such as “advanced”, “best”, “exceptional”, “expert”, “outstanding”, “premier”, “special”, “super”, or “ultimate” are all off limits. Can I form an architecture firm with my unlicensed friend/spouse/partner/colleague? Yes, but it must be a design professional corporation (D.P.C.) and you (as the shareholder with the license) must hold more than 75% of the shares. All other professional entities (limited liability company, partnership, professional corporation) must have only licensed architects as the members, partners or shareholders. -
Form 1120-S, U.S. Income Tax Return for an S Corporation
OMB No. 1545-0123 Form 1120-S U.S. Income Tax Return for an S Corporation ▶ Do not file this form unless the corporation has filed or Department of the Treasury is attaching Form 2553 to elect to be an S corporation. 2020 Internal Revenue Service ▶ Go to www.irs.gov/Form1120S for instructions and the latest information. For calendar year 2020 or tax year beginning , 2020, ending , 20 A S election effective date Name D Employer identification number TYPE B Business activity code Number, street, and room or suite no. If a P.O. box, see instructions. E Date incorporated number (see instructions) OR PRINT City or town, state or province, country, and ZIP or foreign postal code F Total assets (see instructions) C Check if Sch. M-3 attached $ G Is the corporation electing to be an S corporation beginning with this tax year? Yes No If “Yes,” attach Form 2553 if not already filed H Check if: (1) Final return (2) Name change (3) Address change (4) Amended return (5) S election termination or revocation I Enter the number of shareholders who were shareholders during any part of the tax year . ▶ J Check if corporation: (1) Aggregated activities for section 465 at-risk purposes (2) Grouped activities for section 469 passive activity purposes Caution: Include only trade or business income and expenses on lines 1a through 21. See the instructions for more information. 1a Gross receipts or sales . 1a b Returns and allowances . 1b c Balance. Subtract line 1b from line 1a . 1c 2 Cost of goods sold (attach Form 1125-A) . -
Professional Corporation Formation Fact Sheet
Neighborhood Entrepreneur Law Project 42 West 44th Street New York, NY 10036-6604 • (212) 382-6633 [email protected] • www.citybarjusticecenter.org Professional Corporation Formation Fact Sheet A corporation shields personal assets of its shareholders from liability for business debts. Corporations are the oldest and most common form of business entity. Corporations can be C corporations or S corporations. A C corporation pays tax on its own income and distributes profits to shareholders, who then pay tax on the income received from the corporation. S corporations are pass-through entities: profits and losses of the business pass through to its owners, who report them on their personal tax returns just as they would if they owned a partnership or sole proprietorship. Professional corporations (PCs) can only be formed by certain licensed professionals, a list of whom can be found here: www.op.nysed.gov/prof/. Here’s a general overview of the process you’ll need to go through to set up a PC in New York State: Obtain a The PC must be made up of licensed professionals and can only provide one professional service Submit a signed copy of the Certificate of Incorporation (COI) with a check or money order made payable to the Certificate of NYS Education Department for $90.00. Authority from Address for submission: The New York State Education Department, Office of the Professions, P.C. Unit, 89 the NYS Education Washington Avenue, Albany, NY 12234 If the Education Department is satisfied with the information provided, it will send the COI filer a Certificate of Department Authority that authorizes the PC to practice the stated profession. -
LLC Vs C Corporation Vs S Corporation
LLC vs C Corporation vs S Corporation Entities LLC Limited Liability Company C Corporation S Corporation Characteristics Unlimited number of Unlimited number of members Up to 100 shareholders; only one class Ownership Rules shareholders; no limit on stock allowed of stock allowed classes Personal Liability Generally no personal liability of the Generally no personal liability Generally no personal liability of the of the Owners members of the shareholders shareholders Corporation taxed on its With the filing of IRS Form 2553, a C The entity is not taxed (unless chosen earnings at a corporate level and Corporation becomes a S Corporation, Tax Treatment to be taxed); profits and losses are shareholders are taxed on any where the profits and losses are passed passed through to the members distributed dividends through to the shareholders Articles of Incorporation; Articles of Incorporation; Bylaws; Key Documents Articles of Organization / Certificate Bylaws; Organizational Board Organizational Board Resolutions; Needed for of Formation; Operating Agreement Resolutions; Stock Certificates; Stock Certificates; Stock Ledger; IRS Formation Stock Ledger & State S Corporation election The Operating Agreement sets forth Board of Directors has overall Board of Directors has overall Management of the how the business is to be managed; a management responsibility; management responsibility; Officers Business Member (owner) or Manager can be Officers have day-to-day have day-to-day responsibility designated to manage the business responsibility The members typically contribute Shareholders typically purchase Shareholders typically purchase stock Capital money or services to the LLC and stock in the corporation, either in the corporation, but only one class Contributions receive an interest in profits and common or preferred of stock is allowed losses [email protected] 617-610-9616 Disadvantages of the Limited Liability Corporation ■Earnings of most members of an LLC are generally subject to self-employment tax. -
Partnership/S Corporation Basis and Distribution Issues (Psbd)
PARTNERSHIP/S CORPORATION BASIS AND DISTRIBUTION ISSUES (PSBD) Edward K. Zollars, CPA (Arizona) [email protected] www.currentfederaltaxdevelopments.com www.currentfederaltaxdevelopments.com/idpsbd © Kaplan, Inc. 1 CURRENT DEVELOPMENTS - NEWS © Kaplan, Inc. 2 §199A S CORPORATION INSTRUCTIONS • Draft Form 1120-S Instructions, 10/16/19 – New QBI flowchart (p. 39) This Photo by Unknown Author is licensed under CC BY-SA © Kaplan, Inc. 3 © Kaplan, Inc. 4 §199A S CORPORATION INSTRUCTIONS • Draft Form 1120-S Instructions, 10/16/19 – Detailed §199A instructions for K- 1 on page 38 – 3 new statements to be attached to K-1s This Photo by Unknown Author is licensed under CC BY-SA © Kaplan, Inc. 5 © Kaplan, Inc. 6 © Kaplan, Inc. 7 © Kaplan, Inc. 8 §199A REVISIONS TO PASSTHROUGHS • Draft Schedule K-1, Form 1120S, 7/25/19 – Got rid of 5 codes for reporting §199A information – Now simply have code V, item 17 “other information” – Presumably will have to provide all details required by regulations Photo by Ross Findon on Unsplash – Likely to see similar changes on other 2019 K-1s © Kaplan, Inc. 9 §199A REVISIONS TO PASSTHROUGHS • Draft Form 1065, 1120-S and K-1s, 9/26/19 – Tax basis capital only on K-1 – More §704(c) information on K-1 – At risk and passive activity disclosures – Separate out 2 types of guaranteed payments Photo by Ross Findon on Unsplash © Kaplan, Inc. 10 © Kaplan, Inc. 11 © Kaplan, Inc. 12 © Kaplan, Inc. 13 © Kaplan, Inc. 14 §199A REVISIONS TO PASSTHROUGHS • Draft Form 1065, 1120-S and K-1s, 9/26/19 – Tax basis capital only on K-1 – More §704(c) information on K-1 – At risk and passive activity disclosures – Separate out 2 types of guaranteed payments Photo by Ross Findon on Unsplash © Kaplan, Inc.