Your Frequently Asked Tax Questions Answered by Our Tax Specials
If you have tax questions, we have the answers! Below we’ve compiled a list of common questions our tax advisors answer. After reading through our FAQs, if you still have questions give us a call at 824.242.4880 or fill out our contact form to schedule an appointment with one of our tax advisors.
General Questions
Consider below points:
- Annual Minimum Cost of Corporate Maintenance- such Annual Corporate Filing, Minimum Taxes
- State Law and relevant laws – e.g. Delaware and Nevada offers attractive tax advantages. The Delaware Court of Chancery is often considered an advantageous venue for shareholder lawsuits
- Place of Business – It is always recommended to incorporate entity in the state where business will be conducted
Accommodation & food services – providing customers with lodging, meal preparation, snacks, or beverages for immediate consumption.
Construction – erecting buildings or other structures, (e.g. streets, highways, bridges, tunnels). The term construction also includes special trade contractors (e.g. plumbing, HVAC, electrical, carpentry, concrete, excavation, etc.)
Finance & insurance – in transactions involving the creation, liquidation, or change of ownership of financial assets and/or facilitating such financial transactions; underwriting annuities/insurance policies, facilitating such underwriting by selling insurance policies, or by providing other insurance or employee-benefit related services.
Health care and social assistance – providing physical, medical, or psychiatric care using licensed health care professionals or providing social assistance activities such as youth centers, adoption agencies, individual/family services, temporary shelters, etc.
Manufacturing – the mechanical, physical, or chemical transformation of materials, substances, or components into new products. The assembling of component parts of manufactured products is also considered to be manufacturing.
Real estate – renting or leasing real estate to others; managing, selling, buying or renting real estate to others, or providing related real estate services (e.g. appraisal services)
Rental and Leasing – providing tangible goods such as autos, computers, consumer goods, or industrial machinery and equipment to customers in return for a periodic rental or lease payment.
Retail – selling merchandise to general public from a fixed store, by direct, mail-order or electronic sales or by using vending machines.
Transportation and warehousing – transportation of passengers or cargo, warehousing or storage of goods, scenic or sight-seeing transportation, or supporting activities related to these modes of transportation.
Wholesale-agent/broker – arranging for the purchase or sale of goods owned by others or purchasing goods on a commission basis for goods traded in the wholesale market, usually between businesses.
Wholesale-other – selling goods in the wholesale market generally to other businesses for resale on their own account.
Other – activity not described above. Describe the applicant’s principal business activity in the space provided.
It depends upon the country and specific state where it is set up. Such as setting a normal Delaware incorporation just takes 2 working days; while incorporating in India (Maharashtra & most of the other states) it may take between 15- 45 days.
An Employer Identification Number (EIN), also known as a federal tax identification number or FEIN or FEI, is a nine-digit number that the IRS assigns to business entities.
- This number is used to identify a business entity and to identify taxpayers that are required to file various business tax returns.
- A business will need to apply for a new EIN if the business is sold or is otherwise transferred.
- You will need an EIN if you have employees in your new business.
- Banks will require an EIN to open an account for all corporations.
What is the difference between INC and LLC and which one is better ?
A limited liability company is a type of business structure that offers personal liability protections and a few tax advantages to boot. The "LL" in LLC is what protects your personal assets in the event of a judgment against your company. Corporations offer limited liability as well, so we're going to focus on the structural and taxation differences in the chart below.
Corporation:
Despite the ease of administration of an LLC, there are significant advantages to using a corporate legal structure. Two types of corporations can be formed. An S corporation is a passthrough entity for tax purposes. A C corporation is taxed at the corporate level and files a corporate tax return.
Corporations offer more flexibility when it comes to their excess profits. Whereas all income in an LLC flows through to the members, an S corporation can pay its employees a reasonable salary while deducting expenses such as federal taxes. The remaining profits can be distributed as dividends from the corporation. As of 2015, dividends have a lower tax rate when compared to gross income. C corporations have the advantage of allowing profits to remain with the corporation. Thus, the dividends paid from the corporation can be structured to take advantage of the best tax scenario for the shareholders. Also, for businesses that eventually seek to issue stock, the corporation can easily issue shares, while an LLC cannot issue shares.
LLC:
The IRS does not treat LLCs as a distinct entity for tax purposes by default, which offers greater flexibility. An LLC with a single member can be taxed and treated like a sole proprietorship. Thus, profits and losses are taxed on the individual’s personal federal tax return.
There are two options for an LLC with more than one member. The first option is to treat the members as partners. The members are taxed the same as the partners in a partnership. The other option is to tax the LLC as a corporation.
One potential drawback to using an LLC is that members may have to pay self-employment taxes on their profits and any salaries. For an LLC, the profits flow through to the members who deal with them on their federal tax returns. For a corporation, profits are taxed at the corporate level. The individual members usually have to pay for federal items such as Medicare and Social Security. There are other drawbacks as well. There can be an automatic termination of an LLC that is treated like a partnership for federal tax purposes. The automatic termination is triggered if there is a sale or exchange of 50% or more of an LLC’s total interest within a 12- month period. This is called a technical termination. When this occurs, the assets are considered to have been contributed tax-free to a new LLC. The membership interests in the new LLC are then treated as having been distributed to the members of the old LLC. Also, there must be at least two members for an LLC to be treated as a partnership for tax purposes. In contrast, there can be a C corporation or S corporation, which only has one shareholder.
Another major disadvantage is the differences among states in the statutes that govern LLCs. This can lead to uncertainty for LLCs that operate in multiple states. The differences in rules and regulations can result in additional paperwork and inconsistent treatment across different jurisdictions.
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