World Class Mergers & Acquisitions  |  For Companies $5 Million to $250 Million in Revenue

Mergers & Acquisition FAQ – January 2010

Q: I just opened a business and formed it as a limited liability company (LLC) under my state’s laws.  For federal tax purposes, how do I classify my LLC?

A: An LLC may be classified for federal tax purposes as a sole proprietorship, a partnership, or a corporation.  If the LLC has only one owner, the LLC will automatically be treated as a sole proprietorship unless another election is made by the owner.  On the other hand, if the LLC has two or more owners, it will be classified as a partnership unless an election is made.  The election is made on IRS Form 8832.  Unless the election is made, the classification will be the default classifications.

Q: Where is the best place to store estate plan documents?

A: The best place to store estate plan documents is in a location where others a) know of, b) can get into when the time arises, and c) is secure.  Storing the documents in a safe deposit box that a friend knows of can be a good place as long as that friend knows where to get the key at.  The location would be known, able to be opened, and secure.  Hiding documents in a book or in a safe that nobody knows of or does not have the combination renders the documents useless to both you and those that are trying to help you.

Q: Is an S Corporation required to make quarterly tax payments?

A: Yes.  Subchapter S corporations must make estimated tax payments if the amount of taxes required to be paid exceeds the amount specified in the law.  Taxes due from an S Corporation can arise from capital gains, passive activity, built in gains, and depreciation recapture.

By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors