Our services

In addition to tax preparation and planning, Ray Ladouceur, CPA offers advice regarding a range of tax-related matters.  For example, here are some things to consider when forming a business.

 

1. I want to open a business. What are my options?
The easiest form of business is a sole proprietorship, which consists of one owner. A sole proprietorship is not a separate legal entity. It is merely part of the owner's assets and liabilities.

A corporation is a separate legal entity. The corporation issues stock in exchange for cash or property or services rendered. The shareholders select a board of directors, who manage the affairs of the corporation. The directors elect officers of the company who serve at the discretion of the board of directors. A corporation is formed by filing Articles of Incorporation and an Initial Report with the Louisiana Secretary of State through the GeauxBiz website.

 

A Limited Liability Company is similar to a sole proprietorship if it has only one member. If there are multiple members it can be organized as a partnership or corporation. It is owned by its members who share in the profits and losses of the LLC in accordance with their agreed-upon percentages. The members may elect to manage the company or may elect one or more managers to manage the company on their behalf. An LLC is formed by filing Articles of Organization and an Initial Report with the Louisiana Secretary of State.

 

2. How are these entities taxed?
A sole proprietor reports the income and expenses of the business on his personal income tax return.

 

A corporation files its own income tax return. It pays tax at a flat rate of 21%.  However, if a closely held corporation accumulates earnings and fails to distribute its earnings to its shareholders as a dividend, an additional penalty tax may apply.

 

A single member LLC is a disregarded entity for tax purposes.  Its activity is reported on the member's personal income tax return.  A two or more member LLC files its own income tax return, but its income and expenses flow through proportionately to its members based upon their profit and loss sharing ratios for the year. The members pay tax on the LLC's net income, whether this income is distributed to the members or not. If the income is distributed in later years, the members do not pay another tax on the distribution.

 

3. I have heard that corporations are subject to a double tax; could you explain?
A regular corporation pays tax on its own net income. When the shareholders want to collect that net income, they can do so by paying themselves a dividend on their shares or by liquidating the corporation. If they pay a dividend, the corporation cannot deduct the payment, yet the shareholder has to report the dividend as part of his income. If they choose to liquidate the corporation, the shareholders have to pay a capital gains tax based upon the difference between what they put up for their stock and what they receive in the liquidation. In both events, there could be a double tax.

 

4. Is there a way of avoiding a double tax for a corporation?
The corporation can elect to be treated as an S corporation. An S corporation does not pay tax on its own income. Rather, its income and expenses are reported proportionately by the shareholders on their personal income tax returns in the percentage of their interest in the common stock of the corporation. An S election must be made within the first seventy-five days of the corporation's existence or the start of a new tax year. S elections which are made after the corporation has been in existence for some time will trigger a tax in the event the corporation sells assets with a built-in tax profit within five to ten years of the date of the S election. It is preferable to be an S corporation from the beginning of the corporation's existence.

 

For most small businesses, the LLC is the preferred form of business entity.

 

Please call our offices to schedule an appointment with Ray Ladouceur,985-898-2131 ext. 1006 for more information.