1. How many here 37 Recommend attorney’s for incorporations and LLCs.
Direct clients to on line services.
Do the incorporations themselves.
Other ??

2. 37
The Legal Side
Governing documents determine who control the organization.
Who has the ultimate say in a decision?
Do we need a third party to cast a tie breaking vote?
What can a owner do or not due?
How are we getting out of this?
I am your older brother – Hopefully I am not your older sister. And lets say I am 10 years older than you. Can anyone think of an issue?
We are partners, you bring me in because I have a special license and union connections to for work, everything else you have provided for.

3. 37
The Legal Side
Employment agreements- should be based on what the owner does not the ownership percentage.
Lets be friends, sorry about ripping you off in the last example but we are starting the business and we each own 50% how do we set up the compensation?

4. My Path for Single Owner Businesses37
My Path for Single Owner Businesses
Advantages of Sole Proprietorship without the legal liability.
Simple low cost
Great place for dabblers.
SMLLC

5. Mom Hiring Pop Family of 4 No Home Mom’ Schedule C -$90,000
Health Insurance - $8,000
Health cost out of pocket $10,000

6. Hire Pop for $5,000 with Insurance and MRP
Sch C. Hire Spouse Analysis
Without hiring
Hire Pop for $5,000 with Insurance and MRP
Wages $
$ 5,000
Schedule C
90,000
66,617
Adjustments
14,358
$4,707
AGI
75,642
66,910
Standard Deduction
12,600
Exemptions
16,200
Taxable Income
46,842
38,110
FED- less Credit
4,096
2,791
Self-Employed/ Pay
12,716
10,179
Total Taxes
$ 16,575
$ 12,182
Mom Hiring Pop
Adjustment to Schedule C includes
Wages $5,000
Insurance $8,000
Out of pocket $10,000
Payroll Tax paid by employer

7. Can you pay for your children’s schooling and get a deduction for it?
Yes, if you don’t report the income.
Yes, just take that deduction where you want on the return.
Not directly but you can pay them reasonable wages and have them pay for their schooling.
See Page 44. All salaries must be reasonable. No FICA for children under age 18/ FUTA under age 21, employed by parent’s sole proprietorship or a partnership owned 100% by the parents.
Be careful with financial aid.

8. Sch. C- Hiring Children
Dependent children under 18 no FICA Taxes. No FUTA under age 21.
Standard Deduction $ 6,300
IRA deduction $ 5,500
Total Potential Income Shift $11,800 no tax
Can effect Student Aid.
iF you make a ROTH that tax is $473 – 10% bracket.
Retirement assets are not included in FASFA

9. My Path for Single Owner Businesses37
My Path for Single Owner Businesses
S CORP
SMLLC
If I have obtained titled property in who’s name is the property in?
Remember when you check the box or make the S Election you are going to go through a 351 transaction
Allows for transfer to a Corp. tax reporting.

10. My Path for Single Owner Businesses37
My Path for Single Owner Businesses
S CORP
Normally will make the shift when business hirers employees or when excess income is subject to FICA/Medicare Taxes.

11. Mom Hiring Pop Total Taxes Wages $ 0 $ 45,000 Business Income 90,000
Must pay reasonable salary
Sch. C
S Corporation
Wages $
$ 45,000
Business Income
90,000
41,557
Adjustments
14,358
8,000
AGI
75,642
78,557
Standard Deduction
12,600
Exemptions
16,200
Taxable Income
46,842
49,757
FED- less Credit
4,096
4,539
Self-Employed
12,716
Payroll Tax Total
6,886
State Tax
2,763
2,657
Total Taxes
$ 19,575
14,082
Mom Hiring Pop
Payroll Taxes in S Corp 3,443
Please note we must pay reasonable salary

12. Mom Hiring Pop Total Taxes Wages $ 0 $ 90,000 Business Income 190,000
$190,000 Sch C vs S Corp
Sch C.
S Corporation
Wages $
$ 90,000
Business Income
190,000
93,115
Adjustments
17,891
8,000
AGI
172,891
175,115
Standard Deduction
12,600
Exemptions
16,200
Taxable Income
143,309
146,315
FED- less Credit
27,370
28,121
Self-Employed
19,782
Payroll Tax Total
13,771
State Tax
5,833
5,622
Total Taxes
$ 52,985
47,514
Mom Hiring Pop
Payroll Taxes in S Corp 6,885

13. Mom Hiring Pop Total Taxes Wages $ 0 $ 90,000 Business Income 600,000
$600,000 Sch C vs S Corp
Sch C.
S Corporation
Wages $
$ 90,000
Business Income
600,000
593,115
Adjustments
23,382
8,000
AGI
576,618
585,115
Standard Deduction
12,600
Exemptions
Taxable Income
564,018
572,515
FED
169,017
172,382
Self-Emp +Med
33,500
Payroll Tax Total
13,771
State Tax
18,420
18,209
Total Taxes
$ 220,937
204,362
Mom Hiring Pop
Payroll Taxes in S Corp 6,885
Total Savings $16,575

14. My Path For Multi-Owner Businesses37
My Path For Multi-Owner Businesses
LLC Partnership
Just starting out/ long ramp up.
Need flexibility getting in and out page 41.
LLC
PShip

15. My Path For Multi-Owner Businesses37
My Path For Multi-Owner Businesses
When first employees or excess FICA and Medicare Taxes are being paid.
Many of the owners I am dealing with are in multiple businesses and looking for flexibility S
Corps

16. My Path For Multi-Owner Businesses37
My Path For Multi-Owner Businesses
LLC
PShip
Owner
1’s S
Owner
2’s C
Could owner’s 1 corporation have differing benefits than owners 2 corp?
However they we need to be aware of the controlled group and affiliated service group rules
We cant forget about employees that in the LLC Partnership
S Corps owning a LLC Partnership.

17. My Path For Multi Location Liability39
My Path For Multi Location Liability
LLC 2
LLC 1
Parent Entity
Restaurant locations
Contractor/developer
Separate lines of business
Separate Entities to limit overall liability.

18. My Path 39 Less Sophisticated- Keep it simple
I rather have a client mess up on income taxes than payroll taxes any day.
Multiple entities are problematic if there is a lot of intercompany transactions.
C Corps -great for benefits but not for those who lack control.
Not great for professional services
Wages and payments to related parties always have to be reasonable.

19. Choosing the Proper Entity41
Choosing the Proper Entity

20. Choosing the Proper Entity42
Choosing the Proper Entity

21. Choosing the Proper Entity43
Choosing the Proper Entity

22. Choosing the Proper Entity44
Choosing the Proper Entity