Discussion:Counseling a client with new business endeavor
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| Revision as of 19:27, 24 September 2009 MWPXYZ (Talk | contribs) (Maybe the client) ← Previous diff |
Revision as of 04:23, 26 September 2009 Captcook (Talk | contribs) (Generally, I adv) Next diff → |
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| {{ForumReplyPost|UserID=MWPXYZ|Date=24 September 2009|Text=Maybe the client's lawyer should weigh in on whether the commission or royalty route is best; as well as some other provisions that should be in the agreement with the supplier. Then the tax considerations could follow.}} | {{ForumReplyPost|UserID=MWPXYZ|Date=24 September 2009|Text=Maybe the client's lawyer should weigh in on whether the commission or royalty route is best; as well as some other provisions that should be in the agreement with the supplier. Then the tax considerations could follow.}} | ||
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| + | {{ForumReplyPost|UserID=Captcook|Date=26 September 2009|Text=Generally, I advise clients into an LLC and, if the enterprise becomes profitable, we may elect S-status at a later date. If it is not profitable, there are no issues in distributing those assets contributed. Although, I'm in WA and don't have any state income tax complications. Is this client reselling this software or did they develop it themselves? If they developed it themselves, I would lean toward a royalty situation. }} | ||
Revision as of 04:23, 26 September 2009
Discussion Forum Index --> Basic Tax Questions --> Counseling a client with new business endeavor
Discussion Forum Index --> Tax Questions --> Counseling a client with new business endeavor
Actionbsns (talk|edits) said: | 24 September 2009 |
| One of my client's called yesterday and said he and his son are going into a venture involving selling an application for a handheld device to a major supplier of these services. They will provide the software to the supplier who will sell the app for $5.00, client and son will receive 70% of the sales. If this flies, and there are some rose colored lenses here because the supplier has a reputation for being difficult, does the client receive commission or royalties? They are seeking counsel on business type and thinking of doing an LLC. I know there is a lot of discussion on being an LLC taxed as an S corp, and I generally prefer the client to just do an S designation and forget the LLC, but what about an LLC taxed as a partnership? What thoughts are there for this? Pros, cons? Finally, for those in Hawaii, are the funds received on a K-1 subject to GE Tax? The supplier is in another state, so I'm not sure how that will affect Hawaii income. I would appreciate whatever discussion can ensue on this. | |
| 24 September 2009 | |
| Action, you say this is a handheld battery operated device? If it's what I think it is, the market is flooded with them, however, I know a lot of ladies here had their "device" wash away in the flood we had this week. (God was flushing out a pocket of sin West of our city)*.
To answer your question, I think I would suggest the LLC, which is anathema to me, but there you have it, I did it, taxed as a 1065. This may be a one shot endeavor, and it would probably be a simpler way to go. I am not taking in HI particularities, though. .*This is the reason that I, as pastor, will not allow them in the sanctuary during services, even though everyone is bored to death (In the past, I told people they were yelling for the Lord, but it got to be too much, and I banned them). I don't permit cell phones either, especially the ones that vibrate. | |
| September 24, 2009 | |
| Hmmm. Royalties are sometimes free of SE tax, don't know when or why, never researched it. And if so, then I'd definitely stay away from a corp. If they are, then I'd probably go S corp to establish a reasonable salary for the services since it could create huge cash stream that had nothing to do with the value of the time in creating the app. | |
| 24 September 2009 | |
| Maybe the client's lawyer should weigh in on whether the commission or royalty route is best; as well as some other provisions that should be in the agreement with the supplier. Then the tax considerations could follow. | |
| 26 September 2009 | |
| Generally, I advise clients into an LLC and, if the enterprise becomes profitable, we may elect S-status at a later date. If it is not profitable, there are no issues in distributing those assets contributed. Although, I'm in WA and don't have any state income tax complications. Is this client reselling this software or did they develop it themselves? If they developed it themselves, I would lean toward a royalty situation. | |
