Your Farm, Your Business Presentation by: Crystal Middleton, Esq. Land Loss Prevention Project, Smart. Growth Business Center
Overview n Farming as a Business n Choosing the Business Entity n Understanding Smart. Growth
Types of Entities n n n Proprietorship General Partnership Limited Liability Corporation “C” Corporation “S” Corporation
Sole Proprietorship n n n One owner Unlimited liability Lowest formation and maintenance costs Assumed name certificate Freely transferable ownership
Sole Proprietorship (continued) n n n Business income reported on individual tax return Self Employment Tax Rarely used for business with significant revenues (e. g. $100, 000+) Single member LLC gives equivalent tax treatment Normally liquidated following death of owner
General Partnership n No written agreement required l n n Unlimited Liability Apparent Authority of Partner l n n n If written agreement exists, then it controls Each partner may act on behalf of the partnership Conversion; Merger Pass-thru Taxation Limited Fringe Benefits
Limited Partnership n n Formation: filing of certificate Written partnership agreement controls Limited liability for limited partners only Management by General Partner
Limited Partnership (continued) n n n Conversion or Merger Fringe Benefits limited for partners Pass-thru Taxation
Limited Liability Corporation n n Formation: filing certificate with Secretary of State Written Operating Agreement controls Limited liability for members Management by members or by managers Conversion; Merger
Limited Liability Corporation (continued) n n Pass-thru Taxation Limitations on Fringe Benefits for Members/Employees Flexible Capital Structures Single Member LLCs
Pass-thru Taxation Status n No income tax at partnership level Ø n Partner taxed at individual level Partnership losses subject to limitation Ø “at risk” limitations—Partner may use losses only up to amount at-risk • • Ø Capital contributions Personal liability on debt Passive loss limitations • • Loss deductible only up to amount of passive income Balance deducted upon sale of partnership interest
“C” Corporation n Formation Filing Ø Organizational meetings Ø Organizational documents Ø Issuance of capital stock Ø
“C” Corporation (continued) n n n Limited liability Structured management Varied alternatives for capital structure Double taxation Fringe benefits
“S” Corporation n Same formation steps as with “C” Corporation IRS Election to be taxed as “S” Corporation Limitations on Shareholders: 100 or fewer Ø Types Ø
LLC vs. “C” Corporation n Advantages of LLC Ø Pass-thru taxation • • No corporate level tax (no double tax) Allows nontaxable distributions of property to members No franchise tax (in most states) Ø Ease of conversion to corporation Ø Property may be distributed to LLC members without gain recognition Ø
LLC vs. “C” Corporation n Advantages of “C” Corporation: Lower overall tax rates Ø Tax free mergers and reorganizations Ø Flexibility of fiscal year-end Ø Fringe benefits to employee shareholders Ø Well-defined body of corporate law Ø
LLC vs. “S” Corporation n Advantages of LLC: LLC can use pro rata portion of debt as basis Ø No restrictions on types or quantity of shareholders Ø Allows nontaxable distributions of property to members Ø No franchise taxes Ø No threat of “S” status termination by disqualified shareholder Ø
LLC vs. “S” Corporation n Advantages of “S” Corporation: Ø Ø Ø Well developed body of corporate law May switch to “C” corporation easily If currently “C” corporation, may switch to “S” corporation without liquidation Tax on built-in gains may be shifted to other shareholders No constructive termination upon 51% transfer
“S” Corporation vs. “C” Corporation n Advantages of “S” Corporation: Pass-thru taxation avoids double taxation Ø Existing “C” corporation can elect “S” status without liquidation Ø Unreasonable compensation not an income tax issue Ø
“S” Corporation vs. “C” Corporation n Advantages of “C” Corporation: Flexibility on fiscal year end Ø Fringe benefits not taxable to employee/shareholder Ø No restrictions on types or quantity of shareholders Ø
Smart. Growth Resource of the Land Loss Prevention Project n Provides legal assistance, referrals, and informational resources to farmers looking to gain or expand their business expertise n Assists clients in planning for succession n
Questions? Land Loss Prevention Project Phone: (919) 682 -5969 Toll Free: (800) 672 -5839
Скачать презентацию Your Farm Your Business Presentation by Crystal Middleton
783c050e6bd93df5f51c5d4ea1c5fc54.ppt