TAX Flashcards
(TAX) Professional Corporation (Definition)
A Corporation governed by Chapters 607 & 621 of Fla Stat, in which one or more Shareholders must be licensed professionals or entities that themselves are wholly owned by licensed professionals.P.A.s can be taxed either as an S Corp or a C Corp
(TAX) Sole Proprietorship (Definition)
An individual who does not create an entity.
(TAX) Corporation (Definition)
Governed by Chapter 607, FS, whose ownership is not limited to solely licensed professionals. The corporation can be taxed either as an S Corporation or a C Corporation.
(TAX) Professional Limited Liability Company (Definition)
(a/k/a P.L.)Governed by chapters 608 and 621, FS, in which the one or more member(s) must be licensed professionals (or entities that themselves are wholly owned by licensed professionals). The P.L. Can be taxed either as a disregarded entity (if there is only one member), as a partnership (if there is more than one member), or an S Corp. (whether it has one or more member(s)).
(TAX) LLC (Definition)
Governed by Chapter 608, FS, whose ownership is not limited solely to licensed professionals. The LLC can be taxed either as a disregarded entity, a partnership, or an S Corporation.
(TAX) General Partnership (Definition)
Governed by Chapter 620 FS, comprised of two or more general partners. No written document is necessary to create.
(TAX) LLP (Definition)
Governed by Chapter 620, FS, comprised of two or more General Partners, which registers with the State by filing a Statement of Qualification under 620.9001, FS. The registration provides a general liability shield for all of the partners.
(TAX) Limited Partnership (Definition)
Governed by Chap 620, FS, comprised of at least one general partner and at least one limited partner, which is created upon the filing of a Certificate of Limited Partnership with the State under Section 620.1201 FS.
(TAX) LLLP (Definition)
Governed by Chap 620 FS, comprised of at least one general partner and at least one limited partner which is created by filing a certificate of limited partnership and indicating LLLP status in such certificate under Section 620.1201 FS. The status provides a general liability shield for all General Partners.
(TAX) Sole Proprietorship (How Does Fed Income Tax Apply)
No tax imposed on the entity. Instead the individual owner reports the income and pays the income taxes.
(TAX) C Corp (How Does Fed Income Tax Apply)
-Unless it elects otherwise, a Corp must report it’s own income and pay its own Income Taxes , under subchapter C of the IRC.-A C Corp is also subject to FLs St Corp Income Tax at a rate of 5.5%-Any distribution of its earnings to SHs requires the SHs to recognize dividend income, resulting in a second layer of taxation.-Manny Professional C Corps attempt to avoid distributing dividends by paying all income as compensation, resulting in one-layer of taxation (b/c, although it is still taxable to the recipient employee/SH, the C corp gets a deduction for such compensation, resulting in only one layer of taxation)-If a C Corp pays excessive Comp, the IRS may try to treat some of the Comp as a dividend distribution and deny the deduction to the Corp w respect to such imputed dividend.
(TAX) S Corp (How Does Fed Income Tax Apply)
-No tax generally is imposed on a Corp that elects to be treated as an “S Corporation” under Subchapter S of the IRC. Rather, the tax consequences flow-through to the SHs.-Each SH reports his pro rata share of the tax consequences based on his ownership in the S Corp and pays the income tax at his or her effective personal income tax rate.Any distribution to SH is not treated as a dividend but rather a return of basis and then excess is capital gain (may not completely apply if S Corp formerly C corp w/in past 10 years)SH Distributions: (a) must be made in the ratio of ownership; (b) can be abused to “save” payroll taxes applicable to compensation; and (c) lack the asset protection potential of comp payable to the head of a family under FL law.A P.A. generally should elect to be taxed as an S corporation, preferably from inception. If a Corp has already been taxed as a C Corp, then conversion to an S Corp status must be carefully considered to ensure the “built-in gains” tax on realized receivables can be handled through proper accrual and payment of accounts payable and compensation.
(TAX) Basis (Definition)
The basis of property is generally the property’s cost, the amount paid for the property in cash or other property.
(TAX) Dividend (Definition)
A distribution of part of a corp’s past profits to its SHs. Not an expense on the Corps income statement.
(TAX) Capital Gain (Definition)
A profit that results from the disposition of the capital assets, such as stock, bond, or real estate, where the amount realized on the disposition exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price.
