Atlanta CPA...Is Your Business Doing Business in Multiple States?
Knowing a few of the basics of where and when to incorporate your business in Georgia will provide you with needed insight to avoid unnecessary pitfalls, fees, and legal issues that befall many as a result of their failure to have a rudimentary understanding of the issues. Avoid the hype out there about where to incorporate that may well lead you to discover that the steps you made to protect your Georgia business while in good faith, have caused complexities that hurt rather than help your business. In general there are several criteria to evaluate when considering where to originally incorporate/domicile your business. The below is a sample letter we might send to a client to help them understand and to address multi-state reporting issues:
With your income being allocated between states it is even more imperative than ever to ensure that we do adequate tax planning each and every year to ensure that you have paid enough in income taxes during the year to the IRS, GA & AL and to withhold enough from those payroll checks to ensure that you have substantive enough withholdings to pay your income taxes as you as IRS, GA & AL will all add penalties and interest to any late payment.
For example if you had net income in the current year of $50K but had not yet paid taxes on the $100K of Accounts Receiveable that were unpaid at the end of the prior year (as your business is a cash based taxpayer. Then your taxable income on this years return will be $150K.
Please be reminded that your S Corporation does not pay income taxes and that all of the earnings will be allocated to your respective state returns and that your internal accrual based financial statements are substantially that the cash based taxable income that will be reflected on your S Corporation Income Tax Return/IRS Form 1120S. This is predominantly resulting from the $100K of 12-10 A/R that was not paid taxes on in 2011 now becoming taxable when the accounts receivable are collected.
FYI...Of the $150K above
-$130K will be allocated to GA
-$19K will be allocated to AL
Please note that differences occur as a result that each and every state is legally able to determine how the corporate profits of a corporate entity will be allocated.
To learn more about incorporating in Georgia and to where all of the states your business will be required to incorporate visit http://www.hiscpa.com/incorporating.html