A LLC  (Limited Liability Company) is a relatively new type of business entity. LLCs blend elements of corporations with elements of sole proprietorships and partnerships. Much like S and C-corporations, LLCs are treated as separate legal entities and have very limited liability. And much like sole proprietorships, they have pass-through taxation which means the owner only has to pay taxes once, instead of paying both business and personal income taxes.

LLCs are much more flexible than corporations, as there are generally no restrictions on who can be a member of the company, and typically there is much less administrative paperwork and record keeping involved. Also, a LLC is not subject to the same structural requirements as corporations, and they are not required to have a board of directors or officers. Instead, they have what are referred to as members.

However, the statute regarding a LLC varies state to state. In New York, LLCs are subject  to a franchise tax based on their earnings. Also, New York State imposes a publication requirement upon the formation of a LLC that requires it’s members to publish a notice in local newspapers stating that the LLC is being formed.

If you are not sure if a LLC would be a good fit for your business, talk to us and we can help you make an informed decision.

Jonathan Medows, CPA

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique , Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

A S-corporation is any corporation that elects to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. The signature trait of S corps is that they combine the legal environment of a C-corporation with the tax benefits of partnerships.  Much like a LLC, S corporations do not pay their taxes directly, and do not have to pay the double tax of a C corp.

Instead, the income and losses of the corporation are divided and passed through to it’s individual shareholders. The shareholders then file their own individual tax returns. This is referred to as single taxation.

S-corporations share many traits with C-corporations, but there are some key restrictions that apply to the former. While C corps may have an unlimited amount of shareholders, S corps are restricted to having no more than 100. Also, S-corporations can only have US residents as shareholders, and they can only have one class of stock.

Despite these differences, S corps retain the legal business structure of a C-corporation. They both have very limited liability, as they are viewed as separate legal entities from their shareholders.

However, according to the guidelines of the Internal Revenue Service, owners of S corps must pay themselves a “reasonable salary” and pay both the employer and employee portions of social security and medicare taxes, and in the State of New York, they must also pay Unemployment Insurance.

Also, in New York City there is a separate tax on the profits of a S-corporation, and depending on the level of salary, part of the owner’s earnings may be added back in when determining the the taxable income. That said, the salary of the S corp is normally deductible as a business expense.

If you are unsure of what kind of corporation to choose, I can assist you. I can also help you understand the specific requirements of an S-corporation in New York.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique,  Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

Courtesy of New York State:

The New York State Department of Taxation and Finance is mailing letters to more than 700,000 employers and self-employed individuals doing business in the 12-county Metropolitan Commuter Transportation District who may be required to pay a new tax, the first payment of which is due November 2.

The MTA region consists of the five boroughs of New York City and the Counties of Dutchess, Nassau, Putman, Orange, Rockland, Suffolk and Westchester.

This new tax applies to employers and is retroactive to March 1, 2009; employers that are school districts beginning September 1, 2009; and self-employed individuals for the entire tax year beginning January 1, 2009.

First payment of the tax – the Metropolitan Commuter Transportation Mobility Tax – is due November 2. The tax was approved as part of the 2009-2010 state budget, which directed the Tax Department to administer its collection. Revenues will be distributed to the Metropolitan Transportation Authority (MTA).

The tax applies to employers who are required to withhold New York State income tax from wages and who have payroll expenses exceeding $2,500 in any calendar quarter.

For the self-employed, the tax applies if you have net earnings in the MTA region that exceed $10,000 for the tax year. This includes partners in partnerships and members of an LLC treated as a partnership.

All employers and self-employed individuals required to pay the tax can file the appropriate tax forms and make payments by going online to the Tax Department’s website at www.nystax.gov. Paper forms and instructions are available by calling 518-485-2392.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A C-corporation is any corporation that is taxed under Subchapter C of Chapter 1 of the Internal Revenue Code. The majority of major companies file as C-corporations. If a corporation fails to meet even one requirement of a S-corporation, they must file as a C-corporation.

C corps are viewed as separate business entities from their shareholders and directors, and thus receive the benefit of limited liability. Unlike S-corporations or LLCs, the income of a C corp. is taxed under Federal income tax laws. C-corporations cannot pass through income and losses to shareholders. Due to this C corps face what is referred to as double taxation, meaning that they will be taxed as a corporation and later as an individual.

However, C-corporations face less restrictions than S-corporations. They can have an unlimited amount of shareholders and are free to have multiple classes of stock. They can have shareholders who are not US residents, and they are eligible for a dividends received deduction.

Talk to me before you decide whether or not a C-corporation is the right business entity for you. Every business has a unique situation, and I can help you determine what choice would best suit your needs.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique,  Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

A sole proprietorship is an unincorporated business entity that is owned and operated by one individual. Legally, there is no distinction made between the owner and the business. All losses and profits that occur to the sole proprietor are subject to taxation. Also, because all assets of the business are owned by the sole proprietor, all debts of the business are his and he must pay them from his own personal capital. Thus, unlike other business entities, a sole proprietorship has unlimited liability.

Sole proprietorships are by far the easiest kind of business entity to start up, as they are subject to much less paperwork and regulations than other businesses. Also, the sole proprietor has complete control of the business and they take in all profits made from the business. Because they are not incorporated, sole proprietorships don’t have to pay corporate taxes and are not subject to double taxation. The sole proprietor simply pays self-emplyment taxes on the profits they make.

However, there are certain disadvantages to being a sole proprietor. As previously mentioned, sole proprietorships have unlimited liability, and thus are more at risk when it comes to paying debts and confronting other legal matters.  As a business becomes successful, the risks around it tend to grow.

If you are unsure whether or not a sole proprietorship would be best for you, contact us. We can help you decide what business entity would best suit your individual needs.

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

Earlier this year the government enacted the American Recovery And Investment Act of 2009. One of the many actions of this bill was to stimulate the real estate market by giving first time home buyers who bought a home between January 1, 2009 and December 1, 2009 a tax credit of up to $8,000. The act has been quite successful, as the sales of homes have been steadily going back up.

But if you want to get some of this tax credit, you better act soon- the deadline is November 30th.

Because the tax credit has been such a boon to the economy, various members of both the real estate and home building industries have been urging Congress to extend the bill past it’s original November deadline. This lobbying has proven to be effective, as both the House and the Senate are working on legislation that would push back the deadline, and there is even one proposal in the House to raise the credit from $8,000 to $15,000.

That said, you should not assume that the deadline will be extended. If you would like to have your own slice of the tax credit, act now. Considering that the average home purchase takes 45 to 60 days to finalize, the window of opportunity for this deal is getting quite narrow. If you have not yet bought a home by the end of this month or the beginning of the next, you might just miss out.

If you have already bought your home, it is imperative to mention that you can amend your 2008 tax return to get your tax credit now, instead of waiting for next year to file it. Also, if you happened to take advantage of the earlier credit of $7,500, you can also amend your return to receive the additional $500. Talk to us soon and we will assist you in filing your amended 2008 return properly.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique, Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

Recessions are hard on businesses of all kinds, but they can be particularly burdensome on small businesses, especially younger ventures that are just starting up with no past recession experience.

What is imperative to keep in mind is that a recession does not necessarily mean having to cut back on all costs and resources. With good business planning, you should be able to maintain your profits without having to do anything drastic such as selling off inventory or cutting employees off of your payroll.

The best way to strengthen your business plan is by paying close attention to every minute detail of your business. Be sure to track the progress of everything that’s going on: your sales, your expenses, cash flow, customer satisfaction, new projects- everything. Check every single detail of your business as often as possible to monitor growth and to determine future action. Doing this will also make it easy to spot both negative and positive trends and adjust things appropriately.

This is obvious, but you will need to pay extra close attention to your cash flow. Make sure that your eyes are focused on your revenues and your burn rate (negative cash flow). With astute observation you will be able to see if your business is falling into the burn rate, and with good planning you will be able to dig yourself above it before you are too deep in.

Essentially, the smartest business plan during a recession is to stay alert and play it safe. By keeping your eyes open, you should be able to save your business any unnecessary losses.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses

You’ve finally decided what your business is going to be, but you aren’t sure how to turn your idea into a living, breathing, start up business. No matter what your chosen industry is, there are certain steps that every start up business has to take to get on their feet.

The very first thing you should do is research your market. Don’t assume just because you have a product or service that people will buy it. Whittle your market down to it’s parameters by asking yourself basic questions: Who needs your services? Is it a niche market? Is it local or national? Is there room for your business in the market, or is it saturated?

Find out everything you can about your market before you go any further with your business. Make sure that your ideas fit your market like a glove. Knowing your market will be essential to your success.

Now that you know your business fits into the market, you have to acquire some capital to get it started. Determine how much you have, how much you need, and how you will get it. Research the cost of your business. If you need to acquire funds or financing from an investor, start writing a business plan and perfect your pitch.

As soon as you obtain the capital you need you should go about finding both a good accountant and a good business attorney. A good attorney will be able to help you find the right business structure and can advise you when it comes to reviewing your lease and drafting contracts.

A good accountant will help you with tax planning, as well as book keeping and other record keeping. Your accountant will also be knowledgeable on the various state laws that affect businesses, such as sales taxes and other issues. Starting out with a good accountant and a good attorney will save you a lot of hassle and grief down the road.

Next, you will need to determine what kind of business structure you need. There are many options, such as partnership, corporation, limited liability corporation, proprietorship and “S” corporation. Taxes, paperwork, personal liability and regulations vary heavily between the different legal business structures, so it is important to choose the option that best suits you. You will need the help of both your attorney and accountant when figuring this out.

Once you have the business structure that best fits your business, you will have to make sure that you have all of the permits and additional licenses you need. Different businesses have different legal requirements to fulfill, such as zoning requirements and licenses to sell and manufacture specific products. Your lawyer and accountant should again be able to help you in this regard.

Though these are not the only steps necessary to establish a start up small business, following them will put your feet on the ground so you can achieve your goals.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

A Unique Boutique New York CPA Firm Serving the Needs of Individuals & Small Businesses