1902 Wright Place, Suite 200
Carlsbad, CA 92008
760 634-5622
Copyright 2015
Macy Mark Morris, CPA
1902 Wright PL, Suite 200
Carlsbad, CA 92008
760 634-5622
1902 Wright PL, Suite 200
Carlsbad, CA 92008
760 634-5622
Business Income Taxes
Corporations, S Corporations, Partnerships, LLCs and Sole Proprietorships (schedule C) all require adequate accounting and planning to achieve the owners goals while reducing the total taxes of the business and the owner.
I can prepare the tax returns for most any business regardless of the entity type. A business entity can be a sole owner, partnership, LLC, corporation or an S corporation. Each of the business entity types listed below all have special tax rules and state laws. The answer as to which is best, depends on the owners objectives.
Every business needs a double entry accounting system. Any version of Quicken, Freshbooks and Excel are not appropriate accounting systems for any business. The accounting system needs to be maintained on a regular basis. Just downloading transactions is not proper maintenance.
Sole Owner business income is reported on schedule C of the owners personal income tax return. Rental income is reported on schedule E and farming income on schedule F of the owners personal tax return. Tax losses and credits may be limited by the passive activity rules.
Partnerships file an income tax return but pay no tax. Income is allocated among the partners and reported on their individual tax returns. Tax income is not the same as distributions received from the partnership. A partner's basis in the partnership is an important factor in determining taxable income. Tax losses and credits may be limited by the passive activity rules.
LLC limited liability companies elect how they choose to be taxed, as a corporation, S corporation, partnership or if only one member a sole owner. California annually charges LLCs an $800 minimum tax and a fee based on gross receipts.
Corporations are separate legal entities owned by one or any number of stockholders. Money comes back to the owners as employees receiving a paycheck which the corporation can deduct or as dividends which the corporation cannot deduct. Most small corporations with a limited number of stockholders never pay dividends. Generally, lenders will not loan money to a small corporation without the stockholders personal guarantee. California has a minimum $800 tax on corporations. It is usually not beneficial to put appreciable assets like real estate in a corporation.
S Corporations are regular corporations that have elected to be taxed under a different set of rules. The election can be made at the corporation's inception or at a later date. S corporations profits are passed through to the stockholders so the corporation pays no income taxes but the stockholders do. California still imposes the minimum $800 or the lower rate of 1.5% (Vs 8.84%). There are no dividends from an S corporation unless there are undistributed profits from before the S election. Stockholders working for the S corporation should be paid wages that are equivalent to what a non-stockholder would be paid for the same work. Stockholders can take distributions from the S corporation tax free that reduce Basis but not more than their Basis.
Corporations, S Corporations, Partnerships, LLCs and Sole Proprietorships (schedule C) all require adequate accounting and planning to achieve the owners goals while reducing the total taxes of the business and the owner.
I can prepare the tax returns for most any business regardless of the entity type. A business entity can be a sole owner, partnership, LLC, corporation or an S corporation. Each of the business entity types listed below all have special tax rules and state laws. The answer as to which is best, depends on the owners objectives.
Every business needs a double entry accounting system. Any version of Quicken, Freshbooks and Excel are not appropriate accounting systems for any business. The accounting system needs to be maintained on a regular basis. Just downloading transactions is not proper maintenance.
Sole Owner business income is reported on schedule C of the owners personal income tax return. Rental income is reported on schedule E and farming income on schedule F of the owners personal tax return. Tax losses and credits may be limited by the passive activity rules.
Partnerships file an income tax return but pay no tax. Income is allocated among the partners and reported on their individual tax returns. Tax income is not the same as distributions received from the partnership. A partner's basis in the partnership is an important factor in determining taxable income. Tax losses and credits may be limited by the passive activity rules.
LLC limited liability companies elect how they choose to be taxed, as a corporation, S corporation, partnership or if only one member a sole owner. California annually charges LLCs an $800 minimum tax and a fee based on gross receipts.
Corporations are separate legal entities owned by one or any number of stockholders. Money comes back to the owners as employees receiving a paycheck which the corporation can deduct or as dividends which the corporation cannot deduct. Most small corporations with a limited number of stockholders never pay dividends. Generally, lenders will not loan money to a small corporation without the stockholders personal guarantee. California has a minimum $800 tax on corporations. It is usually not beneficial to put appreciable assets like real estate in a corporation.
S Corporations are regular corporations that have elected to be taxed under a different set of rules. The election can be made at the corporation's inception or at a later date. S corporations profits are passed through to the stockholders so the corporation pays no income taxes but the stockholders do. California still imposes the minimum $800 or the lower rate of 1.5% (Vs 8.84%). There are no dividends from an S corporation unless there are undistributed profits from before the S election. Stockholders working for the S corporation should be paid wages that are equivalent to what a non-stockholder would be paid for the same work. Stockholders can take distributions from the S corporation tax free that reduce Basis but not more than their Basis.
Copyright 2015
In accordance with IRS Circular 230, the information on this web site is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.