Final Project Bob Jones.docx - Final Project Bob Jones Memo 1 Final Project Memorandum with Appendix John Reish TAX 650 Final Project Bob Jones Memo 2

Final Project Bob Jones.docx - Final Project Bob Jones Memo...

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Final Project Bob Jones Memo 1 Final Project: Memorandum with Appendix John Reish TAX 650
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Final Project Bob Jones Memo 2 TO: Bob Jones FROM: John Reish, CPA DATE: June 3, 2017 SUBJECT: Financial Strategies for Future Growth After a thorough review of all the data, I would recommend that you would form an S corporation. According to incorporate.com, “An S Corp offers investment opportunities, perpetual existence, and that coveted protection of limited liability. Unlike a C Corp, an S corps only has to file taxes yearly and not subject to double taxation”. By forming this type of corporation, you would be able use your income and losses on an individual tax return (1040). You would also need to file form 2553, to elect the company as an S Corporation. We also think that choosing an S Corporation would be best for you. It can be set up as an L.L.C (limited liability company). This just protects you and your income because according to nolo.com “An limited liability company (LLC) offers protection from personal liability for business debts just like a corporation”. You will have to ensure that personal affairs are kept separate from the LLC. The LLC will benefit you in the future, when the decision is made to start the used car business. An example would be that if you put in $12,000 but rack up $25,000 in debt; you would only potentially liable for $12,000. This could be very beneficial in a used car business sales; a car that is not up to code could lead to a lawsuit. According to IRS Publication 334, “An accounting method is a set of rules used to determine when and how income and expenses are reported. Your accounting method includes not only the overall method of accounting you use, but also the accounting treatment you use for any material item”. Accrual and cash methods are different in terms of how they record expenses and actual
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Final Project Bob Jones Memo 3 revenue. The cash method revenue is only recorded when cash is in hand and not before; which in turn recorded expenses only when cash is paid out. For the accrual method, revenue is recorded when it is earned not when it received. Expenses also are recorded when the bill is received regardless of when it is paid.
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