World Class Mergers & Acquisitions  |  For Companies $5 Million to $100 Million in Revenue

Mergers & Acquisition FAQ – November 2013

Q: I am the owner of an S Corporation. If in any given year I do not take any money out of the company, will I have to pay taxes on the income from the business?

A: S Corporations are what is known as “flow through entities”. If an S Corporation turns a profit, that profit flows through to the owner(s) of the company. Regardless of what distributions or cash the owner takes from the company, the shareholder will see income from the profit of the company.

Q: I just opened a business and formed it as a limited liability company 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.

Q: How do I deduct expenses from an estate to arrive at the true value of the estate?

A: The estate can deduct estate expenses from the estate itself using form 706 or it can use form 1041 to deduct expenses from the income of the estate.

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