Business Tax

All Businesses-Business License, certificate for your name, register with state and federal government. Corporations Separate legal entity, most receive grant from the state, do not have incorporate in a particular state, but where you incorporate you must follow that state's laws LLC not protected against torts, pure flow thru entity (partners get taxed not LLC, even if the partners decide to keep money in LLC) Types General unlimited liability, two or more people conducting business Limited Partnership "Tax Shelter", very formal, Limited Liability Company see anything to raise capital, most popular Limited Liability Partnership similar to LLC, better protection from negligent acts caused by your partners piercing the corporate veil someone sues you for your personal assets Alter Ego Theory you didn't treat your corporation as a corporation (must pay corporation debt with corporation money) Section 351 non-recognition of gain/loss when we transfer property to a corporation, mandatory. If someone to perform services they would have to report the value of stock received as ordinary income A gives up $50FMV $20Basis, B Gives up $50FMV, $30Basis, C give up $50 basis All recognize gain A $30, B $20, C $50, notes are boot and should be recognized as gain(transfer in liabilities do not have to recognize relieved as long as the do not exceed basis) cash method tax payer, disregard payables, accrual it is a liability under 357 principle Section 1032 corporations never recognize gain/loss on transaction with their own stock nonbonefied debt use debt to get cash out of a corporation, recognized gain for non bonefied debt Basis Rule shareholder transferred basis + Gain Recognized - Boot Rcvd -Liabilities Relived Corporate Side transferred basis + gain recognized by the transferor contributions to capital when shareholders pay in and new stock is not issued they should add the amount to their basis Sec1244 losses on stock, qualify stock loss is ordinary