The Balance Sheet, a Scottsdale CPA, will work with new and developing businesses throughout the Scottsdale area to help simplify business formation and incorporation procedures.
We provide free guidance on selecting the correct entity and then checking if its name is available
We have extensive experience to help you determine the best business structure for your specific circumstances whether it be a corporation, LLC, partnership or even branch operation.
We can form your business in any of the 50 states. We will guide you in selecting the appropriate state based on your specific circumstances. Please note that Delaware and Nevada are popular, but often not the best choice.
It is one thing to form the correct company, it's entirely another to harness and manage the tax benefits to your advantage. Our ongoing services will assure that you accomplish this by having the lowest possible tax exposure while also guiding you on how to best take distributions from your company.
Our relationships with multiple banking institutions affords our clients the ability to efficiently open bank accounts, even under strict banking guidelines.
The rules for payroll and social security are daunting. We will guide you on how to properly set up payroll and meet all payroll related compliance matters for both IRS and State. In addition, we will guide you on your options surrounding health insurance, retirement and fringe benefits.
Like a corporation, an LLC is a separate and distinct legal entity. This means that an LLC can obtain a tax identification number, open a bank account and do business, all under its own name. The existence of an LLC begins upon the filing of the Articles of Organization with the Secretary of State. The articles must be on the form prescribed by the Secretary of State.
In an LLC, its owners, known as members, are not personally liable for the debts and liabilities of the LLC. For example, if an LLC loses a big lawsuit and is forced into bankruptcy, the members will not be required to make up the difference with their own money.
An LLC can be taxed either as a "pass-through" entity like a partnership, or sole-proprietorship, or as a corporation. If an LLC chooses to be taxed as a pass-through entity (and most do), the owners of the LLC are not subject to double taxation. This is as opposed to a regular C-Corporation, which pays a corporate tax on its net income (the first tax) and then a second tax when the corporation distributes profits, as the stockholders pay income tax on dividends.
In an LLC, social security and Medicare taxes of approximately 15% are levied on profits to its active members. This can be a significant tax and thus the LLC may be considered too expensive tax wise as compared to other entity choices.
Like limited partnerships and corporations, an LLC is recognized as a separate legal entity from its "members."
Management and control of an LLC is vested with its members unless the articles of organization provide otherwise.
An LLC may specially allocate profits or losses in a different ratio than the members’ interest in profits, unless the articles of organization or operating agreement provide otherwise. This may be a big tax advantage to LLC’s where members’ contribute different amounts.
To validly complete the formation of the LLC, members must enter into an Operating Agreement. This Operating Agreement may come into existence either before or after the filing of the Articles of Organization.
An LLC files its own annual tax forms each year depending on how the LLC is treated for tax purposes. Typically the LLC may file IRS forms 1065, 1120, 1120S, or schedule C. Requisite State forms may also be required.
The "C-Corporation" designation merely refers to a standard, general-for-profit, state-formed corporation. The “C” comes from subchapter C of the Internal Revenue Code which controls the method of taxing profits and operations.
Generally, the C-corporation is taxed on its own profits; then, any profits paid out in the form of dividends are taxed again to the recipient as dividend income at the individual shareholder's tax rate. This creates a “double tax” on the same income.
With proper tax planning, most small corporations avoid paying dividends. Rather, owner-employees are paid salaries and fringe benefits that are deductible to the corporation. The result eliminates the corporate level profit, but does not eliminate self-employment taxes which can be substantial
The C-corporation files its own annual corporate tax forms each year using IRS form 1120. Requisite state forms may also be required.
The “S-Corporation” follows the same state formalities as does a C-corporation (i.e. filing Articles of Incorporation and paying state fees). However, an S-Corporation must make a special tax election using IRS Form 2553. The “S” comes from subchapter S of the Internal Revenue Code which controls the method of taxing profits and operations.
A traditional corporation, known as a C-corporation, is taxed as a separate entity, leading to double taxation. An S-corporation, on the other hand, is a corporation that elects to be treated as a pass-through for tax purposes. S-corporations are thus not subject to double taxation. Therefore, a shareholder's individual tax returns will report the income or loss generated by an S corporation. Moreover, the accounting for an S-corporation is generally easier than for a C-corporation.
In an S-corporation, profits are treated as dividends to the owner and are thus considered unearned income and not subject to self-employment taxes. This can be a significant savings as self-employment taxes are approximately 15% and can add thousands of dollars to your tax bill. Only earnings actually paid out to an owner as compensation for services are subject to self-employment taxes.
We offer an initial consultation to business owners. Email us or call The Balance Sheet at 480-948-1080 .
