Aug 6, 2020 Meeting Notes
/Aug 6, 2020
By Jackie Haldorson
President Kim Boaz started out by mentioning our All Star Video - the goal is to drive people to our website to view the video. Please make sure your profiles on our website are up to date! Note: The profile pic & business card area are switched.
Also please review our FB page!
Jeff Baker has decided to step down after 3 years due to family issues, Angela Clark will now be the Treasurer as well as the Event Coordinator!
Woodard group luncheon is Monday Aug 10. Next ASAP event is happy hour on Aug 20 from 4-5.
Sept 3 luncheon is a cash flow tool demo.
Introductions
Presentation is All About Entities by Jaydra Perfetti CFE,PI, EA, LTC
On surface choosing an entity seems simple but it can be super complex
Why does it matter?
Risk mitigation EX: making the property you own its own entity so if something negative happens to the biz the risk to the property is mitigated
Tax advantage
Other business considerations:
Default - based on how many owners
Ease of bix operations or management
Convenience for stakeholders
Assurance for investors
Requirements of regulation - EX attorney can’t be in a partnership with a non attorney
Tax is an important factor but not the only one!!!
Ideal to contact a lawyer and the CPA at the same time, before making final decisions.
Entity types (not including not for profits)
Sole prop
Only 1 owner, minimal legal set up, taxed on individual tax return, owner is in complete control of biz, liability is entirely on biz owner, income subject to self employment tax
Partnership
More than 1 owner, minimal to moderate legal set up, owners share control of the biz, liability can be on the biz if formal entity is established, tax liability flows through to individual tax return, flexibility to allocate income; expenses, assets & liabilities, income subject to self employment tax for partners
Corporation
One or multiple owners, non participating ownership, no limitation on classes of stock, moderate to complex legal set up & maintenance, shareholders and board of directors control biz, liability is entirely on biz, tax liability paid by corporations, wages & dividends paid to owners are taxed on owners tax return (double taxation), opportunity for flexible compensation arrangement to minimize tax
S-Corp
One or multiple owners (max 100), only 1 class of stock, moderate to complex legal setup & maintenance, special tax status granted by IRS (form 2553), shareholders control the business, liability is entirely on biz, tax liability flows through to owners return, wages paid to owners must constitute reasonable compensation (IRS is super aware if you aren’t taking enough in payroll, don’t want the difference between payroll and disbursements to be really large), owners can take tax free distributions up to basis
LLC
One ore multiple owners, disregarded entity for tax purposes, minimal to moderate legal set up, owners control the biz, tax status elected
How do I choose?
Consider the relevant factors, start simple, change when it's time.
40K in profit seems to be a good line to start payroll, the cost of running payroll will be less than self employment tax
