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Software Club 210: Light Red
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Club_Software_210_Light_Red_Micro_Star_1997.iso
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f302.sbe
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1997-01-01
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51KB
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@Q01
┌───────────────────────────────────────────┐
│ SHOULD YOU INCORPORATE? ELECT TO BE AN │
│ S CORPORATION? OR BE AN LLC? │
└───────────────────────────────────────────┘
Please enter the name of your business (or your proposed
business):
@TX
01\Q30
@Q02
QUESTION: Is this a business that you have already started
(or acquired)?
@YN
01\Q03
02\Q10
@Q03
QUESTION: If you were to sell your business (or the stock
of your incorporated business) today for its fair
value, how much of a taxable gain or a loss would
you have on the sale? (Make your best estimate.)
. 1 - A gain of over $1 million
. 2 - A gain of $500,000 to $1 million
. 3 - A gain of $100,000 to $500,000
. 4 - A gain of $50,000 to $100,000
. 5 - A gain of about $0 to $50,000
. 6 - Breakeven, more or less
. 7 - A loss of less than $50,000
. 8 - A loss of $50,000 to $150,000
. 9 - A loss in excess of $150,000
@MC\09
01\Q04
02\Q04
03\Q04
04\Q04
05\Q04
06\Q04
07\Q04
08\Q04
09\Q04
@Q04
QUESTION: Is the business in question already incorporated?
@YN
01\Q05
02\Q10
@Q05
QUESTION: Is the corporation an "S corporation"?
@YN
01\Q06
02\Q22
@Q22
NET OPERATING LOSS OR TAX CREDIT CARRYOVERS: A C corporation
that incurs net operating losses or has more tax credits than
it can use in the current tax year can generally carry the
losses or unused tax credits back to any of its 3 preceding
tax years, to obtain refunds of taxes paid in those years.
However, for a new corporation, or one that has no profitable
prior years to carry losses or credits back to, there is no
other choice but to carry the net operating losses (NOL's) or
credits over to future years, in the hope that it will
eventually have taxable income against which a NOL or credit
carryovers can be offset, reducing taxes in those future
years. (Most NOL's or unused tax credits can be carried
forward for up to 15 tax years after the year incurred.)
QUESTION: Does your C corporation have substantial unused
net operating loss or tax credit carryovers at
present?
@YN
01\Q06
02\Q06
@Q06
TAX LOSSES: Start up losses incurred by a regular ("C")
corporation cannot be passed through to shareholders, but
must be carried forward until (if ever) they can be used to
offset future taxable income of the corporation....And a
more-than-50% change in stock ownership of the corporation
can severely reduce the corporation's right to use a large
part of any such tax loss carryovers.
S corporation elections can be very useful in the early stage
of a business if it is losing money, due to the fact that the
losses an S corporation incurs can be "passed through" to its
shareholders and, in many cases, deducted on their individual
tax returns. An S corporation can also pass through certain
tax credits, such as various jobs credit and certain other
business credits, which might not be utilized currently in a
C corporation that has little or no net taxable income.
QUESTION: Is your corporation generating tax losses (Or do
you expect it to?) in amounts you consider substantial?
@YN
01\Q21
02\Q07
@Q21
The usability of a corporation's tax losses, even if it is
an S corporation, depends upon whether those losses (or tax
credits) can be passed through and utilized by stockholders.
Thus, such losses may not flow through to your individual
tax return if, for instance, they are "passive activity"
losses; you or the S corporation are not considered "at-risk"
with respect to the losses; or you lack sufficient "tax
basis" in your S corporation stock to utilize any further
losses. Or, even if the losses or credits flow through to
your individual return, you may not be able to use them
currently, due to insufficient taxable income of your own in
the current year (or preceding 3 years) against which the
losses can be applied, or else credits may not be usable by
you due to such factors as the alternative minimum tax (AMT).
QUESTION: To the best of your knowledge (only your tax
adviser can tell you for sure about this one),
do you think you could utilize your corporation's
tax losses if it is an S corporation?
@YN
01\Q12
02\Q12
@Q07
QUESTION: How much annual PRE-TAX profit do you expect the
corporation to earn each year in the near future
(assuming you limit owner salaries to no more
than $100,000 a year per owner, as a maximum) ?
. 1 - None: We expect to have losses, or very
minimal net profits, under $10,000 (as
defined above)
. 2 - Between $10,000 and $100,000 profit (as
defined above)
. 3 - Between $100,000 and $335,000 profit (as
defined above)
. 4 - Over $335,000 pre-tax profit (as defined
above)
@MC\04
01\Q12
02\Q12
03\Q12
04\Q12
@Q10
TAX LOSSES: Start-up or other losses or tax credits earned
by an unincorporated business (sole proprietorship, LLC, or a
partnership) can generally be passed through to the owner or
owners, to be claimed on their individual income tax returns.
(Unless the deductions or credits are suspended due to the
at-risk or passive activity loss rules, or on account of
insufficient tax basis.) Such losses or credits cannot be
used if the legal form of the business is a C corporation,
but must instead be carried over to another year in which
the corporation has taxable income.
QUESTION: Will your business generate tax losses or tax
credits in the next tax year (or two), in
amounts that you consider substantial?
@YN
01\Q12
02\Q11
@Q11
QUESTION: How much pre-tax profit (per owner, if more
than one owner) do you expect the business to
earn, on average, for the next few years
(assuming the business is not incorporated)?
. 1 - None: We expect to have losses, or not
over $50,000 profit (as defined above)
. 2 - Between $50,000 and $100,000 profit (as
defined above)
. 3 - Between $100,000 and $335,000 profit (as
defined above)
. 4 - Over $335,000 pre-tax profit (as defined
above)
@MC\04
01\Q12
02\Q12
03\Q12
04\Q12
@Q12
Medical insurance, medical reimbursement plan expenses, and
other "fringe benefits" such as disability insurance and
group-term life insurance are generally not deductible
expenses for owners of unincorporated business or shareholders
(owning 2% of the stock or more) of S corporations. By
contrast, a C corporation that pays for such benefits for
its employees, including owner-employees, is generally able
to deduct such expenses, with the value of such coverage
generally NOT being taxable to the employees (except for
the value of group-term life insurance coverage in excess
of $50,000 for a given employee).
QUESTION: Do you (or does your business) plan to purchase
medical coverage, disability insurance or group
term life insurance for you or the other owners
of the business?
@YN
01\Q20
02\Q20
@Q20
DIVIDENDS-RECEIVED DEDUCTION. A C corporation may sometimes
be used advantageously to hold dividend-paying stocks, since
the federal tax law allows the corporation to avoid paying
tax on 70% of the dividends it receives (80% if your company
owns 20% or more of the stock of company paying a dividend).
This deduction is NOT allowed to an S corporation