Being incorporated means that you've established a business which is now separate from you. You can choose to incorporate as an LLC, S-Corp or C-Corp. For most small and startup business, LLC or S-Corp should be sufficient.

As the name implies, an LLC can protect your personal assets in the event you are sued. LLCs are "pass through" organizations. This means that the profits (or losses) are passed through to you as an individual on your personal tax return. If the LLC is a single-member LLC (only one owner) then a separate business tax return is not needed at the federal level, some states may still require a filing.
​This is an advantage because you do not need to pay for an additional tax return to be filed. As a single member LLC your income and expenses will be detailed on schedule C just the same as a sole proprietorship. You, of course, will be subject to self-employment tax.
Additionally, LLCs have a less formal structure and do not limit the number of owners or restrict owner eligibility based upon residency status.

Like an LLC, an S-Corp can also protect your personal assets and is also a pass through organizations. The major differences are a) you must file a business tax return and b) there are limits on number of owners and who can be an owner.
Form 1120-S must be filed for any business that is incorporated as an S-Corp. Meaning you will need to pay for and file 2 tax returns and your business return will need to be completed before your personal return.
S-Corps are limited to 100 shareholders (owners) and depending on residency status, not everyone is eligible.
S-Corps have one other noteworthy advantage over LLCs. They can reduce self-employment tax. As an S-Corp you may pay yourself a salary out of the company and when the profits are passed through to your personal return there will be no self-employment tax.

For most small businesses, starting out as a sole proprietor is sufficient. As the company grows larger and/or becomes susceptible to lawsuits that is when you may want to consider incorporating. Always check with your local and state government to get all the facts on how to apply and register as your desired entity. Every state has different requirements and different fees. 

I can't choose for you but I hope these few distinctions will help you make the right choice for your business.

Always consult your own tax professional before making any major moves and if necessary, consult an attorney.

Your Mobile Tax Pro,
Liz

It's September and it's the perfect time of year to start thinking about charitable donations. A lot of us donate clothes, shoes and other unused household items to places like Goodwill or the Salvation Army. You may also donate to your favorite charities or religious organization too. We'll be talking about what can or can't be donated to who it may or may not be donated and how to keep proper records.

You may only donate cash to IRS qualified exempt organizations. The EO Select Checklist will help you determine if your preferred charity qualifies. If you donate cash but receive a benefit such as advertising in a local magazine you must reduce the deductible amount by the value of the benefit received. For example, you donated $100 to the city magazine in return for a small ad in the back. If the ad is valued at $40, your $100 contribution will be  reduced to $60.

Remember to always keep a written transaction of your donations. This could be a cancelled check, bank record or written record from the organization.

Personal property such as clothing and household items can be donated as long as they are in good usable condition. If you donate more than $250 worth of items you must keep a written record. Donating more than $500 in value will require Form 8823 to be filed with your tax return. A donation of $5000 or more will require an appraisal of the item being donated and the appraisal will need to be attached to your tax return. Appraised items will also be listed on Form 8823.

​Vehicle donations must have a 1098-C attached to your tax return. Vehicles do not necessarily need to be in working condition to be deductible.

Depending on your income, your ability to claim a deduction of charitable giving may be limited. Currently, if you are filing joint, you may have an AGI up to $311k before being limited (AGI is less for single and head of household filers).

If your AGI is above the AGI threshold your contributions may be limited to 20%, 30% or 50% of your AGI depending on the type of property given and the type of organization given to. 

Remember, always consult your tax professional or use my contact form for inquiries.

Your Mobile Tax Pro,
​Liz