Federal Tax Accounting

This week’s assignment presents a scenario and requires the completion of a table with tax information connected to analyzing Federal Taxation for Business Entities and Owners. Please use the following Media Activity – Navigating the Tax Landscape: An In Depth Analysis of Federal Taxation for Business Entities and OwnersLinks to an external site., to assist you in completing Assignment 1.
Scenario
Brenda, Oscar, Oliver, and Margot have known each other for years. They are planning to open up a marketing/advertising company and call it BOOM. They are trying to decide how to best structure their company.
Initial Conversation regarding Business Structure
Brenda says, “I think that we should be a corporation. This will protect us from personal liability, and we will not be personally responsible for the company’s income taxes.”
Oscar says. “Maybe so, but we will have less money in our pockets because of double taxation. Although I have heard that an S-Corporation allows the tax responsibility to flow through to the owners.”
Oliver pipes up with, “Well, we could make it an LLC. My understanding is that an LLC would protect us from personal liabilities – all while keeping our profits from being double taxed.”
Margot said, “Yeah, but if it’s an LLC, that means that I am personally responsible for a portion of the income taxes, and I’m not sure that I’ll have the cash money to cover that. I think that we should make it a partnership. We could always convert it later to a corporation.”
Oscar responds with, “Whatever we decide, we should make it that and keep it. I don’t want to be changing the structure down the road – that sounds like a big headache!”
The Reach-Out
They decide to reach out to Lizzy Bolin for help. Lizzy is a well-known and respected accounting lawyer, holding both a Juris Doctorate (JD) degree and a Chartered Public Accountant (CPA) designation. Lizzy is also your boss, and she has assigned this project to you, as her assistant.
Meeting the Client
You believe in the maxim, “An educated client is a better client.” You will provide information to the group that will allow them to make an informed decision.
An initial discussion with the group identifies the following:

Although they excel at marketing, no one in the group understands very much about accounting or taxes.
Individually, they have reached out to friends and acquaintances for their input and have been provided with a lot of “ideas” – most of which have just added confusion to the group.
They are particularly concerned with “all the forms the IRS requires” and want to know what is required for each particular business structure and how the choice of business structure will impact who pays the taxes.
Oliver will be receiving a salary of $60,000, which is considered reasonable. For the first year, he will be the only one receiving a salary. The question of how will this impact expenses for each potential business type will need to be determined.

You decide to keep it simple while providing them with enough detail within a Business Tax Structure Chart in order to make a good decision.
Instructions
To complete this assignment following the instructions:
Complete a Business Tax Structure Chart that identifies the four company structures: C Corporation, S Corporation, General Partnership and Sole Proprietorship and their tax characteristics using the following criteria:
Within the chart complete the following:

Identify which tax forms: Form 1040 Schedule C, Form 1065, Form 1120, Form 1120 S are used in all four of the company structures.
Identify the dates the forms are due to the IRS in all four of the company structures.
Identify who is responsible for the liabilities of the business in all four of the company structures.
Identify what the owner limits are for each business structure in all four of the company structures.
Identify the compensation paid to the owners for services rendered in all four of the company structures in all four of the company structures.
Identify how the payroll taxes on the owner’s salary will be managed in all four of the company structures.
Identify if owners are subject to Medicare tax on compensation leave in all four of the company structures.
Identify if the business must formally organize with the state in all four of the company structures.
Identify if the business is suitable for an IPO (Initial Public Offering) in all four of the company structures.

The chart template for this course is provided and can be downloaded from Canvas. Follow these steps:

Please click on the following file link Business Tax Structure Chart Download Business Tax Structure Chart.
Download the file to your computer.
Follow the instructions provided to complete this assignment.
Save the completed chart with your last name and first name, the week number, assignment number, and the words (Business Tax Structure Chart). For example, YourLastName YourFirst Name, Week 3 Assignment 1 Business Tax Structure Chart.

Resources

Navigating the Tax Landscape: An In Depth Analysis of Federal Taxation for Business Entities and OwnersLinks to an external site.

TranscriptLinks to an external site.

Business Tax Structure ChartDownload Business Tax Structure Chart

The specific course learning outcomes associated with this assignment are:

Analyze federal taxation for business entities and owners, considering the impact of entity choice and ongoing business decisions with taxes.

 
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