CHOOSING THE RIGHT STATUS FOR YOUR COMPANY
March 16, 2022 - Douglas Myser
Choosing the right status for your company. When starting a business, the first question that needs to be answered is, what type of operation is it, and what type of status for tax purposes do you want it to be ? That needs to be done upfront, otherwise you may well end up like the multitude of companies that have called us up looking for Tax Resolution Services, due to a tax debt, caused by improper accounting practices and possible picking the wrong status. The implications for businesses can be devastating. We had a partnership that contacted us for Tax Relief, the IRS had disallowed 6 years of tax returns that went back nearly 10 years. We had to reconstruct and refile all the returns. A real mess. Choosing the right status for your company.
S corporations are a very popular form of business structure. They are similar to partnerships in terms of how they work. The S-Corp profits, and losses are reported on a From 1120-S, but the Corporation does not pay income taxes. The shareholders receive Schedule K-1 from the S-Corp pay the income taxes on their personal form 1040. LLCs are another very popular form of formation. Your ability to form an LLC is dependent on what state you live in--each state has different LLC requirements and regulations. Unlike S Corporations, LLC's can have an unlimited number of members and each member owns a certain percentage of the company. The IRS also treats an LLC differently based on how many members it has. If you are the sole owner of a single member LLC, you will be taxes the same way as a sole proprietorship.
If you have a tax debt, due to choosing the wrong status, or IRS Wage Garnishment from picking the wrong status, and want to explore all options for Tax Resolution, including the IRS Fresh Start Program, check out the information contained in the back links for help for a Tax Professional.