Duluth CPA Advises America's Business Owners: Your Business Taxes
When preparing your corporate income tax returns as part of the return, whether you are an S Corporation or a C Corporation you are required as part of the return to notate what type or trade your business is in. A trade or business activity can be defined as an activity that:
Is involved with the trade or conduct of business
Is carried out in the start of trade or business
If the trade or activity is not carried out directly by the shareholder that activity is determined to be a passive activity of the shareholder. Every shareholder must claim whether he or she did or did not participate in the business and if active must take a fair and reasonable salary given position and profit. Every incorporated business or trade t must file a Form 1120 if a C Corporation or a Form 1120S if an S Corporation. Shareholders will have their prorated business income in box 1 for Schedule K-1 which is then reported on an individual shareholders personal income tax return. All shareholders must claim activities as passive or not, depending on if they were materially participating in the activity.
It is critical for all business owners to use a CPA for their tax preparation services who are well experienced with all of the below issues to ensure they pay only their lowest legal possible tax: • Financial Planning • Selling Your Business • Quality Control Issues
• Technology/IT Consulting • Setting up financial accounting systems • Serving as a part time CFO by providing management consulting services • Developing budgets and business forecasts • Preparing tax returns • Analyzing, creating, reading company financial statements • Analyze income and expenses, and prepare a cash flow statement • Assessing benefit and compensation plans • Selecting the proper corporate entity type • Establishing a Limited Liability Company or Partnership • Advising the proper use of business tax deductions • Incorporating