Many Consumers are great business owners but have little or no tax experience.
Services Offered to Small and Medium Sized Companies
- Business Assessment and Development
- Estimated Quarterly Payment Plans Devised
- Start up Business Services
- Basic Accounting Practices
- Understanding what forms to file and when
- State Tax Requirements
- Technical Compliance
- Revenue Officer Representation
- Amended Returns
- Corporate Returns
- Schedule C's, 940, 941 and basic returns
- Business and employment taxes
- Choosing your business structure
Integrity Tax Relief Group will help you bring your company into compliance with the IRS and State Departments of Revenue!
A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and you, the owner. You are entitled to all profits and are responsible for all your business's debts, losses and liabilities.
Sole Proprietor Taxes
Because you and your business are one and the same, the business itself is not taxed separately-the sole proprietorship income is your income. You report income and/or losses and expenses on your personal tax return when filing your taxes.
Advantages of a Sole Proprietorship
- Easy and inexpensive to form.
- You have complete control.
- Reasonably simple tax preparation
- Minimal filing requirements
Disadvantages of a Proprietorship
- Unlimited personal liability
- Hard to raise money
- Heavy burden
Limited Liabilities Companies
A limited liability company is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. The "owners" of an LLC are referred to as “members.” Depending on the state, the members can consist of a single individual (one owner), two or more individuals, corporations or other LLCs.
Unlike shareholders in a corporation, LLCs are not taxed as a separate business entity. Instead, all profits and losses are “passed through” the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just like the owners of a partnership would.
Forming an LLC
While each state has slight variations to forming an LLC, they all adhere to some general principles:
- Choose a Business Name
- File the Articles of Organization
- Create an Operating Agreement
- Obtain Licenses and Permits
- Hiring Employees
- Announce Your Business
In the eyes of the federal government, an LLC is not a separate tax entity, so the business itself is not taxed. Instead, all federal income taxes are passed on to the LLC’s members and are paid through their personal income tax. While the federal government does not tax income on an LLC, some states do, so check with your state's income tax agency. LLCs that are not automatically classified as a corporation can choose their business entity classification. You should file the following tax forms depending on your classification:
- Single Member LLC: A single-member LLC files Form 1040 Schedule C like a sole proprietor.
- Partners in an LLC: Partners in an LLC file a Form 1065 partnership tax return like owners in a traditional partnership.
- LLC filing as a Corporation: An LLC designated as a corporation files Form 1120, the corporation income tax return.
Combining the Benefits of an LLC with an S-Corp
There is always the possibility of requesting S-Corp status for your LLC. The LLC remains a limited liability company from a legal standpoint, but for tax purposes it can be treated as an S-Corp. Be sure to contact the state’s income tax agency where you plan to file your election form. Ask about the tax requirements and if they recognize elections of other entities (such as the S-Corp).
Advantages of an LLC
- Limited Liability
- Less Recordkeeping
- Sharing of Profits
Disadvantages of an LLC
- Limited Life
- Self-Employment Taxes
An S corporation (sometimes referred to as an S Corp) is a special type of corporation created through an IRS tax election. An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation.
An S Corp is a corporation with the Subchapter S designation from the IRS. To be considered an S corp., you must first charter a business as a corporation in the state where it is headquartered. According to the IRS, S corporations are “considered by law to be a unique entity, separate and apart from those who own it.” This limits the financial liability for which you (the owners or “shareholder” are responsible. Nevertheless, liability protection is limited – S Corps do not necessarily shield you from all litigation such as an employee’s tort actions as a result of a workplace incident.
What makes the S Corp. different from a traditional corporation (C Corp.) is that profits and losses can pass through to your personal tax return. Consequently, the business is not taxed itself. Only the shareholders are taxed. There is an important caveat, however: any shareholder who works for the company must pay him or herself “reasonable compensation.” Basically, the shareholder must be paid fair market value, or the IRS might reclassify any additional corporate earnings as "wages."
Forming an S Corporation
Before you form an S Corporation, determine if your business will qualify under the IRS stipulations. To file as an S Corporation, you must first file as a corporation.
Combining the Benefits of an LLC with an S Corp
There is always the possibility of requesting S Corp status for your LLC. NTC can advise you on the pros and cons.
Most businesses need to register with the IRS, register with state and local revenue agencies, and obtain a tax ID number or permit. All states do not tax S corps equally. NTC can explain the tax rates to you. Most recognize them similarly to the federal government and tax the shareholders accordingly.
Advantages of an S Corporation
- Tax Savings
- Business Expense Tax Credits
- Independent Life
- Disadvantages of an S Corporation
- Stricter Operational Processes
- Shareholder Compensation Requirements
Determine Your Federal Tax Obligations
When starting a business, you must decide what form of business entity to establish. Your form of business (e.g., sole proprietorship, partnership, LLC) determines which income tax return form you have to file. The federal government levies four basic types of business taxes:
- Income tax
- Self-employment tax
- Taxes for employers
- Excise taxes
State Income Taxes
Nearly every state levies a business or corporate income tax. Like federal taxes, your state tax requirement depends on the legal structure of your business. For example, if your business is an LLC, the LLC is taxed separately from the owners of the business, while sole proprietors report their personal and business income taxes using the same form used to report their business taxes.