CharacteristicsSole ProprietorshipGeneral PartnershipLimited Liability CompanyS CorpCorporationFormationJust one owner. No state filing requiredTwo or more owners, called partners. No state filing required.State filing required; most states do not require more than one owner. Owners are called membersState filing required. One or more owners, called shareholders. Restrictions on who can be an owner.State filing required. One or...Read More

Although I’d be the first person to advise business owners to hire a pro to do their tax returns, I understand that sometimes, especially when a business is new, the owner has more time than money. Therefore, I’m always willing to help do-it-yourselfers by answering questions about specific tax issues. Of the questions asked by...Read More

When the Tax Code originally became law back in 1913, if you sold a business asset that fit the general definition of “capital asset,” you had a capital gain or loss. Period.  During and immediately after the depression of the 1930’s, most assets decreased in value. Many businesses were unwilling to upgrade their equipment during...Read More

In Part 1, I introduced Gary and Denise Allen, who sold all the assets of their moving and storage business for less than their original purchase price and expected to at least get a tax break as a consolation prize. Instead, their CPA handed them a tax return that said they had a net gain....Read More

Very Important Operating Instructions A limited partnership has at least one general partner, usually a corporation or limited liability company, that is liable for all partnership debts. There must also be at least one limited partner, whose liability is limited to the amount the partner invested in the partnership. In order to retain their limited...Read More

I paid my way through graduate school by purchasing decrepit old houses in not-so-bad neighborhoods, fixing them up, and either renting them out or selling them. While I was working on my MBA, one of the tenants in an apartment building I owned was tearing up the place and picking fights with the other tenants....Read More

Caution: The procedure described below for filing a late S election for an LLC is somewhat technical, and most business owners will probably want to have professional help if they have missed the deadline for making the election. We got a new client last week, a young man I’ll call Ed, who started a furniture...Read More

Season Tickets to Sports Events You cannot deduct the cost of “facilities” such as deer leases or country club memberships. However, the special rules for facilities do not apply to season tickets. You can deduct the cost of season tickets, but you must allocate the cost to each separate entertainment event. For example, here in...Read More

Many financially distressed companies accumulate large liabilities for employment taxes withheld from their employees’ wages. These taxes can be assessed personally against the company’s principals. When a company fails to pay its Federal employment taxes, the trust fund portion of those taxes can and will be assessed personally against the business’s “responsible persons” (such an...Read More

Several readers have written to ask what happens to business assets when a sole proprietorship becomes a Limited Liability Company (LLC). Last time I wrote about the legal aspects of transferring non-cash assets from the individual sole proprietor’s name into the name of the LLC. Today I would like to discuss the tax effects of...Read More