2005 Small Business Tax Workshop Material
Table of Contents / Page No.
ENTITY SELECTION 1-66
How is Income Taxed? 2
Types of Entities 2-66
1) Sole Proprietorship 2-7
Non-Tax Considerations 2
Tax Considerations 3-7
Hiring the Children 4
Hiring the Spouse 5
Self Charged Rent 5
Advantages & Disadvantages 7
2) Partnership 7-14
Non-Tax Considerations 7-8
Tax Considerations 8-14
Section 754 Election 9-12
Advantages & Disadvantages 13
Partner’s Basis Worksheet 14
3) Corporation 15-56
Non-Tax Considerations 15-16
General Law 15
Corporate Formalities 15-16
Tax Considerations 16-56
S Corporation 16-20
S Corp. Shareholder Basis Worksheet 18
Employer/Employee Relationships 19
Advantages & Disadvantages of an S Corp 20
C Corporation 20-56
Qualified Personal Service Corp. 21-22
Double Taxation 22-23
Payroll vs Dividend with Examples 23-27
Distributions to Shareholders 28-30
2006 Tax Rates 28
Tax Rate Examples 29-30
When are Corporate Taxes Due? 31
Social Security vs. S.E. Taxes 31
Deductible Fringe Benefits 43
Tax on Invest. Income 43
(Acc. Earnings Tax) 43-45
Acc. Earnings Tax Worksheet 45
Switch from C to S 46-47
Pers. Serv. Corp 48
Sale of Bus./AMT 48
Qual. Retirement Plans 49
Lower Basis for Sale 49
Lower Sales Price 49
Unfavorable Gain/Loss Treatment at Liquidation 50
Cost of Tax Returns 50
Advantages & Disadvantages 39
Sole Proprietorship to C Corporation 51-58
Making the Switch - Transfer of Assets 57-58
Partnership to C Corp 58
Inside Basis vs. Outside Basis 58-59
Partners Transfer Interest 60-61
Liquidate Partnership 61-62
Warning: Partnership to S Corporation 61
Corporation Liquidations 62-66
Reasons for liquidation 62
Drawbacks to liquidating a C Corporation 62-63
Covenant Not to Compete 64-65
Liquidating a C Corporation (Examples) 65-66
C Corporation to S Corporation 67
Built-In Gains Tax 40-56
Built-In Gains Tax Worksheet 42-44
Built-In Gains Tax Example 45-55
4) Limited Liability Company 56-66
Non-Tax Considerations 56
One Member LLC 56-58
Tax Considerations 58-66
Husband and Wife (Community Property States) 59
Self-Employment Tax and the LLC 60-61
Advantages & Disadvantages of LLC 62
Required Records for LLC 62-63
LLC vs. LLP 64
Switching from Corporation to LLC 65
Switching from Partnership to LLC 65-66
DOMESTIC PRODUCTION ACTIVITIES DEDUCTION 161-170
Activities eligible for U.S. production activities deduction 161
Food and Beverage Industry 161
What constitutes manufacture “in significant part" 162
Substantial in nature test 162
Safe harbor test 162
Packaging design and development activities 163
Domestic production gross receipts defined 164
Cost of goods sold and other expenses allocated 164-165
Taxable income/AGI limitation 166
50%-of-W-2-wages limitation 166-167
Domestic Employees 168
Deduction of pass-thru entities 168
Deduction of “expanded affiliated groups” 168
Domestic production activities deduction example 168-169
Businesses that qualify and don’t qualify for the deduction 170
ENERGY EFFICIENT NEW HOME CONSTRUCTION CREDIT 171-174
S CORPORATION DISTRIBUTIONS 175-195
SECTION 351 TAX-FREE INCORPORATION 196-205
Section 351 Transfer Statement 55-56
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