Archive for the ‘Business Strategies’ Category

Husband and Wife LLC?

April 4th, 2017 No comments

We recently spoke to a new business owner (not a client) and he told us that he had formed a single member LLC (SMLLC) that was owned by him and his spouse. We informed him that a “single” member LLC means exactly that, it has a single owner. Thus, he and his wife could not be joint owners. When we inquired if he had filed a partnership return, he responded that he had filed his business return on Schedule C of Form 1040. And he assured us that everything was done correctly because he had hired an attorney to form the LLC.

Since curiosity got the better of us, we researched his LLC on the PA Dept. of State website and saw that he and his wife were organizers for the LLC. While a single-member LLC can have multiple organizers, it can only have a single owner. When we shared this with the business owner, he said that he was fairly certain that he and his wife were owners, thus perhaps they were a partnership. Unfortunately, this scenario is not atypical as many business owners do not understand their business structure.

We also recently read a discussion between CPAs as to whether a husband (H) and wife (W) can be joint owners of an LLC. There were some who believed it was doable, others disagreed. Thus, there are CPAs and likely other professionals who do not understand the tax rules regarding LLCs and spousal ownership.

The rules are quite clear. If you have a SMLLC, it can only have one owner. By default, it is classified as a sole proprietorship by the IRS. The SMLLC, if it desires, can request to be treated as a C Corporation or an S Corporation. Read more…



September 29th, 2015 No comments

When working with clients on tax preparation and tax planning, one of our focuses is to minimize the likelihood of an Internal Revenue Service (IRS) audit. It is surprising how many business owners do not take precautionary steps to minimize the odds that their company is selected for an IRS audit examination. For example, although the IRS requires businesses which maintain inventories to physically count the inventory on hand every year, far too many business owners claim they don’t have the time to take a physical inventory or do not see the benefit of an annual physical inventory. These business owners simply report the same inventory balance on their books every year.

It can be time-consuming to conduct a physical inventory. There are essentially three steps involved in taking a physical inventory:

  1. Count—first you count all of the items in your inventory
  2. Identification—next you choose a method of identification which basically means how you match the inventory items to the cost. Common methods include the Specific Identification Method (used when you can match the actual cost of each item individually), FIFO (first-in first-out) or LIFO (last-in last out) methods
  3. Valuation—finally you need to value the inventory and this is an area that can have the greatest impact on calculating your taxable income. Commonly used methods include the actual cost you paid for the items and the lower of the actual cost or the current market value

Once the physical inventory is taken and valued, the inventory balance shown on the books as of the date of the physical inventory is increased or decreased and an offsetting entry is recorded to the cost of sales (COS) (or cost of goods sold). The change to the COS will impact the company’s taxable income which is why the IRS is concerned about physical inventories. Remember this simple formula: Beginning inventory + purchases – ending inventory = COS.

If audited by the IRS, the business owner will be asked to produce Read more…



May 12th, 2015 No comments

Every year we learn that a client or two has invested in rental real estate when sending us his tax information to prepare his personal tax returns. Rather than consulting with his tax professional about the additional tax preparation services that will be required, and more importantly meeting with his tax consultant to discuss tax planning strategies associated with making the purchase, the buyer has impulsively acted on his emotions which is not prudent. While real estate can be a very important component as part of a diversified portfolio, as with any investment, due diligence should be done.

What are some tax and other considerations that are often ignored? Read more…



February 25th, 2015 No comments

If you are an employer who believes that you determine whether someone who works for you is an employee or an independent contractor, you are mistaken!

How many times have we heard an employer say that the worker is an employee and the worker agrees as evidenced by an independent contractor agreement that both parties signed? A written agreement between a worker and the worker’s employer does not control the worker’s status. Pennsylvania’s (PA) Unemployment Compensation (UC) law requires an examination of the facts to determine if the worker is an independent contractor. Whether the services are performed on a full-time or part-time basis is immaterial to an individual’s employment status.

Contrary to what some employers believe, the following factors Read more…

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April 22nd, 2014 No comments


Tax preparation and tax planning services are evolving as small business owners are turning to health care advisors and their tax professionals to learn how they may reduce their health care costs. As employers explore ways to reduce their health care costs, employees covered by those plans will be affected.

The Journal of Accountancy had an excellent article written on Feb. 4, 2014 by Ken Tysac that discusses how employers can possibly control their health care costs. Mr. Tysac hit the nail on the head when he cited industry experts who say that employers who consider cost-savings strategies must also evaluate their impact on various other factors, including employee morale, productivity, retention, and recruiting.

Cost-savings strategies discussed in this article included: Read more…

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April 8th, 2014 No comments

Our September 24, 2013 blog posting discussed the automatic tip charges that restaurants had to abide by effective January 1, 2014. Currently in the news are proposals to increase the minimum federal wage which would affect many in the hospitality industry. According to Yahoo Finance, a local Philadelphia restaurant chain, Chickie’s and Pete’s (C&P), ignored labor laws and will pay $8.5 million to its employees for failing to pay them the minimum wage as well as improperly keeping part of their employees’ tips. The U.S. Department of Labor (DOL) reported this as the largest wage-and-tip violation in its history. The restaurant chain separately announced that it would spend almost $1.7 million to settle private lawsuits with some of its employees. The DOL probe apparently took about a year which undoubtedly cost the company much in professional fees and lost time for the employees handling the audit.

Unfortunately, far too many taxpayers often “adopt” policies or procedures based on what their friends, neighbors, and business associates tell them Read more…

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