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Parker13

posts: 2

Feb 19, 2008 4:41 PM ET Quote Report Abuse

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We are selling our business - we will have a profit of about 350K. Is there any way to avoid taxes - such as reinvesting the money right away? Is there a way to ballpark calculate the tax on that amount?

Thank you.

glgcpa

posts: 86

Feb 19, 2008 9:04 PM ET Quote Report Abuse

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You have not even begun to supply enough information to answer your questions. For starters one would need to know:

The type of entity
The number of owners
How you calculated the gain (did you do it properly? is this really gain or is some of it considered income?)
What was the gain for - buildings, inventory, goodwill, etc?
What do you plan on using the money for?
Is this an installment sale or a lump sum payment?
What`s your income bracket?
How long did you own the entity before you sold it?
What type of business were you in?

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Gina L. Gwozdz, CPA
http://GLGcpa.com
http://TaxTreasures.com

CFOtoGo

posts: 67

Mar 16, 2008 12:19 PM ET Quote Report Abuse

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What Gina needs to say is if you are expecting a $350,000 profit you should probably consult with a tax adviser right away. Chances are good they will save you money. Don`t wait until the sale is complete. How the sale is structured can affect how much you pay in taxes.

I suggest calling Gina. I`ve read her responses to tax questions and she is spot on.

vwebworld

posts: 1237

Mar 16, 2008 1:45 PM ET Quote Report Abuse

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In addition to the above posts, I`d add....

In general you can not avoid taxation by reinvesting.

The gain you anticipate may not be the taxable gain depending upon what you`re selling, your basis, and selling terms. Also, how it is taxed depends upon the structure of the ownership (a corp., sub-s, partnership, sole-proprietor...)

~Roland

-------------------------

Web Design | Best Beef Jerky | ecommerce articles | Follow vwebworld on Twitter

glgcpa

posts: 86

Mar 16, 2008 4:25 PM ET Quote Report Abuse

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Thank you both for your kind words.

Roland, you`re correct that you cannot avoid taxation by reinvesting, but depending on the type of entity and business he may be able to defer some or all of the tax on profits by reinvesting it.

-------------------------

Gina L. Gwozdz, CPA
http://GLGcpa.com
http://TaxTreasures.com

dsmboosted

posts: 7

Jun 30, 2009 3:20 PM ET Quote Report Abuse

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I am starting a new LLC that I will be the only owner of. I have no employees and am based out of Wisconsin. This will be an online business selling a product and service.

I have allready formed the LLC in Wisconsin. My questions are this:

Do I need an EIN # for taxes or can I use my SSN? I will be hiring a web developer to design my website, but they will be contracted out.

What do I need to do to pay the contractor legally? Are there any forms I need to file?

QuickBooksCoach

posts: 19

Jun 30, 2009 4:16 PM ET Quote Report Abuse

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If the developer is an individual you need to get his id#. Use Form W-9. then at the end of the year you will send him a 1099. You will file these forms with the IRS.

Open a separate bank account for the business as it is a corporation and under state law is a separate entity. Will also help you to keep better records.

Hope this helps.

KenRogers

posts: 46

Jun 30, 2009 5:24 PM ET Quote Report Abuse

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If you have a FIEN, use that vs. your SSN. It is very easy to go online (irs.gov) to get your FIEN in real time.

PLEASE DO NOT underestimate Mike`s advice about have a seperate checking account. I have seen too many businesses not do that only to cause massive heartache for the ownwer. I will add that even if you don`t get a seperate credit card for your company, you should submit an expense report to the LLC and get reimbursed. Seperating expenses is very important to the IRS.

For contractors, you should get their FIEN or SSN. You need that to produce 1099`s.

The IRS is paying attention to this more and more as there is less revenue collected from contractors. If you have only contractors earning large amounts and no employees, the IRS may try to prove you are mis-classifying empolyees as contractors. The IRS is also paying attention to 1099`s to match up the revenue the contractors should be reporting.

-------------------------

Ken Rogers, MBA, CPA
CEO
My Fiscal Office, LLC

1-888-756-3606 x701

Check out the free resources on our website, www.myfiscaloffice.com and sign-up for our free monthly newsletter.

dsmboosted

posts: 7

Jul 01, 2009 11:09 AM ET Quote Report Abuse

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Ok, I will get an FEIN. So at the time that I pay the contractor, all I need to do is get thier FEIN or SSN and I will issue a 1099 at the end of the year? There is no form(other than a reciept) that I issue them at time of payment?

KenRogers

posts: 46

Jul 01, 2009 12:11 PM ET Quote Report Abuse

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The 1099 is issued to the contractor and typically that is issued by Jan 31 for the previous year. So, by Jan 31 2010 you send each contractor a 1099 if you have paid them over $600 in total for 2009. Typically, anyone who is incorporated does not need to get a 1099 (like Staples or FEDEX).

You`ll also need to file a report with the IRS - 1098 - that is a listing of all the 1099`s you issued for the year. That is due by Feb. 15th.

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