2004 Small Business Workshop Material

Table of Contents / Page No.

ENTITY SELECTION 7-92
Introduction 7-8
How is Income Taxed? 7-8
Types of Entities 8-92
1) Sole Proprietorship 8-11
Non-Tax Considerations 8
Tax Considerations 8-11
Hiring the Children 9-10
Hiring the Spouse 10-11
Advantages & Disadvantages 11
2) Partnership 11-18
Non-Tax Considerations 11-12
Tax Considerations 11-17
Section 754 Election 13-16
Advantages & Disadvantages 17
Partner’s Basis Worksheet 18
3) Corporation 19-84
Non-tax Considerations 19-20
General Law 19-20
Corporate Formalities 19-20
Tax Considerations 20-84
S Corporation 20-28
S Corp. Shareholder Basis Worksheet 21
Previous “C” Corporate Earnings 22-23
Social Security/Income 23-27
Advantages & Disadvantages of an S Corp 28
C Corporation 28-84
Qualified Personal Service Corp 29-30
Double Taxation 30
Payrooll Vs. Dividend with Examples 30-34
Salaries and Rent 35
Dividends Related to E&P 35
Reducing Dividend Dilemma 35
Salaries (& cases) 36-39
Loans to Shareholders 41-43
Leasing of Property to a Corporation 43-44
Payment of Shareholder Personal Expenses (& Cases) 44-45
Corp Purchases Stock 45-46
Divorce & Constructive Dividend 46
Distributions to Shareholders 46-47
2004 Tax Rates 47
Tax Rate Examples 48-49
When are Corporate Taxes Due? 49
Social Security vs. S.E. Taxes 50
Deductible Fringe Benefits 50
Tax on Invest. Income 50
Acc Earnings Tax 51-53
Acc. Earnings Tax Worksheet 53
Switch from C to S 54-55
Pers. Serv. Corp 56
Sale of Bus./AMT 56
Qual. Retirement Plans 57
Lower Basis for Sale 57
Lower Sales Price 57
Unfavorable Gain/Loss Treatment at Liquidation 58
Cost of Tax returns 58
Advantages & Disadvantages 58-59
Sole Proprietorship to C corporation 59-66
Section 351 Transfer Statement 63-64
Making the Switch - Transfer of Assets 65-66
Partnership to C Corp 66
Inside Basis vs. Outside Basis 66-68
Partners Transfer Interest 68-69
Liquidate Partnership 68-70
Warning: Partnership to S. Corporation 69
C Corporation to S Corporation 70
Built-In Gains Tax 70-81
Built-In Gains Tax Worksheet 72-74
Personal Holding Company Status 81-84
4) Limited Liability Company 84-89
Non-Tax Considerations 84-86
Tax Considerations 86-89
LLC. Vs. LLP 90
Switching from Corporation to LLC 91
Switching from Partnership to LLC 91-92
EMPLOYEE BENEFITS BY THE ENTITY 93-119
Medical Reimbursement Plans 93
Health Insurance 94-95
Disability Insurance 96
Long-Term care Insurance 97
Medical Savings Accounts (MSA) 98-107
MSA Contribution Limitations 99-101
Health Savings Accounts (HSA) 108-112
HSA Contribution Limitations 109
Transition Relief for 2004 Plans 111
Transition Relief for Prescription Drug Plans 111
Health Reimbursement Accounts (HRA) 113-115
HAS/HRA/MSA Comparison Chart 116
Employee Benefits for Non-related Employees 117
Employee Benefits for the Business Owner 118
Employee Benefits for the Spousal Employee 119
RETIREMENT PLANS 120-147
2004 Small Business Tax Workshop Material
Simplified-Employee Pensions (SEPs) with Example 120-124
Savings Incentive Match Plan for Employer (SIMPLE) with Example 125-136
Individual 401(k) with Examples 137-142
Traditional 401(k) Plans 143-146
Safe Harbor 401(k) Plans 147
DEPRECIATION AND SECTION 179 EXPENSE 148-167
Section 179 Expense 148
Qualifying Property 148
Taxable Income Limitation 148-149
Limits for Partnerships and S Corporations 149
Additional 30% First Year Depreciation 150-153
Additional 50% First Year Depreciation 154-156
Depreciation Recapture and Unrecapture 157-167
Section 1231 Business Assets 157
Recapture of net ordinary 1231 Losses 157
Section 1245 Recapture 159-160
Depreciation Flow Chart 162
Unrecapture Section 1250 Gain 163-167
CORPORATION LIQUIDATIONS 168-217
Drawbacks to Liquidating a Corporation 168
Cost to Liquidate 169
S Corporation and Cases 170-172
Liquidating a C Corporation 172-173
Liquidating an S Corporation 174-175
Observations of Liquidations with Examples 176-200
Thoughts of Consider 201
Letter of Instruction (Sample) 202
Board of Directors Minutes (Sample) 203
Articles of Dissolution 205-206
Other Considerations 211-217
Distribution of an Installment Note 211-212
Section 1244 Stock 213-214
Section 338 215
Qualified Small Business Stock 216-217
Section 1202 Exclusion 216
Section 1045 Rollover of Gain 216-217