I’m not a CPA nor do I play one on TV, nor did I sleep at a Holiday Inn last night. In fact, I didn’t sleep at all!
We have a disagreement, but it is based on our experiences and the what varying situations have dictated.
Hubby however is a CPA, and his experience tells him that the type of business that you have, its size and limitations and needs dictate what is a better deal for owners.
Not to have a battle of opinions on this, I respect your opinion and your experience and the diplomatic manner with which you have presented your information. Thank you.
As far as a gift, yes it is a gift. I assumed incorrectly concerning the recipient. Yes, the giver pays taxes if necessary under the law, but note that the amount is now 12,000, rather than 11,000. I was completely wrong about the recipient. You know what happens when I assume! How often to we escape double and triple taxation?
I am always happy to get facts and stand corrected, in the pursuit of truth.
Thanks.
The overall point I was making remains in tact. You can have multiple business and each one can be structured differently and that dealing in cash is the fastest way to hide income, which is of course illegal.
These folks are pretty slick and know how to work the system obviously, so the so called facts in the Baltimore Sun article remain at the very very LEAST, in question.
Is everyone asleep now?
You are correct. The decision as to which form of business entity to use is based on the client’s needs and expectations. For some clients, an S corp is appropriate, for others a C corp or an LLC would be better. It is tailored to a client’s particular needs and tax situation.
Now, to really put everyone to sleep, the main differences between an S corp and an LLC are as follows:
S corporations are pass through entities, as are LLCs. There is no tax paid at the corporate level. Instead, profits and losses are passed through to the shareholders (or members).
In order to be an S corporation, you can not have more than 75 shareholders and all must be US citizens or legal residents. You can only have one class of stock with identical voting rights, dividend rights, etc. Profits and losses are passed through to the shareholders pro rata based on ownership percentages.
In an LLC, you must elect how you want to be taxed. If you elect to be taxed as a corporation, you can be taxed as a C corp (and pay tax on the corporate level as well as sharehoilder level) or an S corp, in which case you have to follow the S corp rules. In the alternative, you can elect to be taxed as a partnership. (This is the attraction of the LLC form of entity). If you elect partnership tax status, you can have more than 75 members and there is no citizenship requirement. You can have multiple classes of stock with different payment rights, payment priority, voting rights, etc. You can also specially allocate profits and losses. For instance, if you have one member who has a lot of passive investments and can use the losses as a write-off, and other members have no need or use for the losses, you can allocate all of the losses to the guy who can use them.
So, as you can see, the special circumstances of the client dictates which form of business is to be used.