There is a new tax that requires an estimated tax payment by November 2, 2009.  It applies to employers (ie people who payroll and is paid as part of your payroll processing) and to those who are self-employed and active members of LLCs and Partnerships (ie those people who pay self-employment taxes as part of their tax returns).

Below is an excerpt from an email I sent out in Mid Agust.  The main thing to remember is that if you have self-employment earnings (aka profit) over $10,000 this tax applies to you.  Feel free to reach out to me if you need assistance preparing this estimated tax.   I estimate the prep fee to handle this will be between $50-$150 depending on how long it takes me to prepare this for you.

The metropolitan commuter transportation mobility tax (MCTMT) is a new tax imposed on certain employers and self-employed individuals engaging in business within the metropolitan commuter transportation district (MCTD). This department administers the tax for the Metropolitan Transportation Authority. (The MCTD includes the counties of New York (Manhattan), Bronx, Kings (Brooklyn), Queens, Richmond (Staten Island), Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester.)

For those with payrolls, this tax will be collected as part of the New York State payrolls. For those who are members of partnerships, LLC or self-employed there are additional filing requirements. The tax is .34% (.0034) of your total net earnings from self-employment allocated to the MCTD for the tax year when self-employment earnings (i.e. for partners or members of LLC who are active member of self-employed individuals) are in excess of $10,000. The state is requiring:

• For tax year 2009, your estimated tax payments are due as follows:

• For tax years after 2009, pay estimated tax for each quarter as follows:

In addition, the state now requires a separate tax return to account for this tax. The return for 2009 will be due by April 30, 2010.

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 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

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

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

Many potential business clients have asked me about entity selection. I hope the following is helpful:

The first major decision facing entrepreneurs is what kind of legal entity to establish for their businesses. That decision is complicated matter with profound tax consequences, so make sure you talk to a professional (hopefully our firm) about your choices.

There are multiple business structures, each with their own pros and cons. For instance, entrepreneurs who incorporate get the prestige factor of having an “Inc.” after their business name, and they enjoy limited protection from personal liability for their companies.

However, but the annual expenses and paperwork required for a corporation makes it too expensive and time-consuming for some small companies. Here are some common business entities:

Sole Proprietorships and General Partnerships: These are the simplest and least-costly business entities. Many home-based and micro-business owners operate as sole proprietorships. Income generated by these entities is “passed through” to the owners and reported as income on their personal tax returns, so the business itself pays no federal income tax. The downside to these forms of doing business is that the owners do not get any personal protection from liability if their business is sued.

Limited Liability Companies: This is a relatively new legal entity that offers some liability protection for the business owner but also operates on a pass-through basis, saving the owner from paying both business and personal income taxes.

S-Corporations: These corporations operate for tax purposes identically to pass-through entities such as general partnerships. S-Corporations are not subject to federal corporate income tax, though there may be state tax on their income. S-corporations are limited in their number of shareholders and are allowed to have only a single class of stock. If formed and operating correctly, they do offer liability protection for owners.

C-corporations: Companies with large numbers of shareholders and different classes of stock typically incorporate as C-Corporations. Unlike S-Corporations, the C-Corp is subject to tax on its income when earned, plus its shareholders are taxed on the corporate income when it is distributed to them.

Talk to an me about your business before you decide which business entity to operate under. There’s no “right answer” for everyone when it comes to forming a business entity.

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