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More Than You Ever Wanted to Know About Sub Chapter S Corporations Presented by: Bill Parrish

More Than You Ever Wanted to Know About Sub Chapter S Corporations Presented by: Bill Parrish. Most Popular Business Entity. LLCs Are Not Overtaking Blend of Features of Partnership and C Corps Restricted Ownership Rules Election Requirements . Compensation Issues. Reasonable Compensation

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More Than You Ever Wanted to Know About Sub Chapter S Corporations Presented by: Bill Parrish

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  1. More Than You Ever Wanted to Know About Sub Chapter S CorporationsPresented by:Bill Parrish

  2. Most Popular Business Entity • LLCs Are Not Overtaking • Blend of Features of Partnership and C Corps • Restricted Ownership Rules • Election Requirements

  3. Compensation Issues • Reasonable Compensation • Too Little • Family Income Shifting • Excessive Compensation • Constructive Distributions • Government Compliance Initiatives

  4. Shareholder Benefit Issues • 2% Shareholder Status • Medical Benefits • Health & Accident Insurance Premiums • Health Savings Accounts • Payroll Taxes on Benefits to Shareholders

  5. Office in Home • Different Than Sole Proprietorship • Different Than Partnership • Treated as Itemized Deduction • Subject to 2% AGI Limit • Circumstances Must be Factual

  6. Distributions Earnings & Profits Account (E&P) Accumulated Earnings & Profits Account (AEP) Accumulated Adjustments Account (AAA) Distributions With No AEP Distributions With AEP

  7. Other Schedule M2 Accounts • Undistributed Taxable Income Previously Taxed (PTI) • Earnings as S Corp between 1958 & 1982 • Other Adjustments Account (OAA) • Catch All Account

  8. Ordering of Distributions Layers of a Sandwich • All S Corps to the Extent of AAA • To Shareholders with pre-1983 PTI • S Corporations with AEP • All Other Distributions

  9. Basis Issues • Inside Basis • Usually Tracked at the Corp Level • Equity Basis • Loan Basis • Outside Basis • Usually Tracked at the Shareholder Level • Stock Basis • Other Basis

  10. S Corporation Pitfalls • Disproportionate Distributions • Distributions in Excess of Basis • Limits on Benefits to 2% Shareholders • Limitations on Pass Through of Losses

  11. Separately Stated Items • Interest Income • Dividend Income • Capital Gains • Charitable Contributions • Section 179 Depreciation • Certain Losses

  12. Advantages of S Corporation Status • Avoid Double Taxation on Profits • Allows Limited Pass Through of Losses • Provides Planning Opportunities

  13. Planning Opportunities • Structure of Distributions • Limited Opportunities to Slowly Transfer Family Business • Protection of Personal Assets • Employment of Family Members • Ability to Enjoin Employees in Partial Ownership

  14. For More Information • Bill Parrish • billparrish@oneplusone3.com

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