1. Legal Entities Presented by: Sue Grover, CPCU, APA, CIPA

2. Major Types Sole Proprietorship Partnership Corporation LLC Other

3. Sole Proprietorship Principal: Owner Only one (Sole proprietor) A spouse cannot also be an owner How paid: Draw How taxed: Schedule C (not on 941) Classify as an employee (according to duties) / Payroll split – company decision Premium basis - (flat amt vs min/max) Excluded in most states

4. Sole Proprietorship Records / Special Considerations Cash Disbursements (check book) Schedule C (Form 1040) – should always be reviewed DBA (no affect on the audit) Family members Unpaid, but active – generally included, depends on the state ($=similar employee) Paid, but inactive – generally excluded

7. Partnership General Partnership Other types: Limited Liability Partnership Limited Partnership

8. Partnership Principals: Partners 2 or more How paid: Draw How taxed: Form 1065, K-1 (not on 941) Classify as an employee (according to duties) Premium basis - (flat amt vs min/max) Excluded in most states

9. Partnership Records / Special Considerations Cash Disbursements (check book) Form 1065, K-1 DBA (no affect on the audit) Family members Unpaid, but active – generally included, depends on the state ($=similar employee) Paid, but inactive – generally excluded

12. Corporation Types: Public vs private C Corp Subchapter S Corp

13. Corporation Principals: Officers President, Vice President, Secretary, Treasurer Also Sr VP, Exec VP, Asst, CEO, CFO, etc. In accordance with the by-laws or corporate minutes Executive Director – usually NOT a corporate officer (NOT subject to min/max)

14. Corporation Principals: Officers, contd How paid: Payroll How taxed: 941 Classify to the principal operations (exceptions: supt/foreperson or construction) Premium basis – total payroll (min/max) Included in most states (but may elect to be excluded in many)

15. Corporation Special considerations, Officers Can exclude if “inactive” / Rule 2.E.1.b.(5), Payroll is excluded when... The executive officer is elected for the value of his/her name or because of stock holdings, has no duties and does not visit the premises, except perhaps to attend directors' meetings. The executive officer ceases to perform any duties and does not visit the premises, except perhaps to attend directors' meetings.

16. Corporation Special considerations, Officers, contd Flight duties / Rule 2.E.1.b c. (1) For each week that the executive officer did not perform flight duties, assign the executive officer's payroll to the classification that applies to the principal operations in which the executive officer is engaged. (2) For each week that the executive officer performed flight duties, assign the officer's payroll for that week to Code 7421—Aviation— Flying Crew. (Unless subject to a higher rated classification, then assign that higher rated classification for that week.)7421

17. Corporation Special considerations, Officers, contd Flight duties, contd (2),contd Note: The above rules apply on the basis of the pilot's logbook, which is required under federal regulations, or on the basis of verifiable records. (3) If Code 7421—Aviation—Flying Crew applies and verifiable records are not kept to indicate those weeks during which flying is performed by the executive officer, assign the executive officer's payroll to the highest rated classification that applies to any of their duties.7421

18. Corporation Special considerations, contd Multiple corporations - considered a single unit with respect to the application of the executive officer rule

19. LLC Types Single Member – Owner - files a 1040 Corporation - files an 1120 or 1120S Multiple Member – Filing varies by state (partner or corporation)

20. LLC Principals: Members (or Managers?) Members - the owners of LLCs. Members can be individuals, corporations, other LLCs, trusts, pension plans, etc. Managers - appointed by the members to manage the LLC. They are treated as employees (not limited).

21. LLC Principals: Members, treated as Partner or Officer (varies by state) How paid: Varies by state How taxed: Varies by state Classify: Varies by state Premium basis: Varies by state Excluded/Included: Varies by state

22. Questions Sue Grover – contact information sgrover@cws-gr.com 800-523-8501, x7948 651-653-5665