TAX 650 Final Milestone Project.docx - TAX 650 Final Milestone Project Kelly Boone July 1 2018 Memorandum To Bob Jones From Kelly Boone Date July 1 2018

TAX 650 Final Milestone Project.docx - TAX 650 Final...

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TAX 650 Final Milestone Project Kelly Boone July 1, 2018
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Memorandum To: Bob Jones From: Kelly Boone Date: July 1, 2018 Re: Business entity for Bob’s Used Cars I. Memorandum Business Entity After conducting research into the type of business entity that you should use for your used car business, I am recommending that you form a limited liability company (LLC). By structuring your business as an LLC you will be protected from person liability. According to § 301.6231(a)(7) of the Internal Revenue Code (IRC) a “member-manager means a member of an LLC who, alone or together with others, is vested with the continuing exclusive authority to make the management decisions necessary to conduct the business for which the organization was formed” [26C181]. As the owner of an LLC you would be considered a member and therefore would not be held personally liable for the debt or obligations of the used car dealership. “An LLC is a business structure that combines the features of a corporation (in terms of limited liability) and a partnership (in terms of tax efficiencies and business flexibility)” [Ila17]. Another advantage to this structure is that you can be a single member LLC or you can add your daughter Mandy as a member and be a multi-member LLC. You will have to file an Articles of Organization form with the Florida Department of State Divisions of Corporations. This can be filed electronically or by mail with the payment of $125.00 fee. According to the Florida Department of State Divisions of Corporations, you will have to include in the Articles of Organization the name of the business which must include LLC, both the physical and mailing
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address of the business, the name and Florida street address of the registered agent, the name and address of each authorized manager for the business, and the effective date of the business existence. You will also need to file for the business federal employee identification number (FEIN) with the IRS. This can be done electronically as well and there is no fee for this. Accrual Accounting and Cash Basis According to Morah (2018) the distinguishing factor that determines the difference between the accrual method of accounting and the cash basis method of accounting is when the expenses and revenues are recognized. The IRC states that “section 446(a) provides that taxable income shall be computed under the method of accounting on the basis of which a taxpayer regularly computes his income in keeping his books” [26C182]. For a taxpayer that is using the accrual method of accounting “revenue is recorded when earned and expenses are recorded when consumed” [Bra17]. Under the cash basis method of accounting a taxpayer would recognize cash or revenue when it is received from the consumer and any expenses are recognized or “recorded when cash is paid to suppliers and employees” [Bra17].
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  • Winter '15
  • rylandmahathey
  • Corporation, Taxation in the United States, Limited Liability Company, Income tax in the United States

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