Recommendation for Business

Calhoun Business Associates[pic 1]

To:        Davis Kitchen & Bath

CC:        Jackson Davis

From:        Tiara Calhoun

Date:        6/14/2015

Re:        Recommendation for Business

Recommendation of Business

First of all congratulations on your business and its success our company is here to help you every step of the way.

I understand that you are trying to start up a business. I see that you are no stranger to the business world. I see that you have already started up a sole proprietorship, and the profits are already great and you are looking to expand. I would recommend the S-Corporation. The reason that I am recommending the S-Corporation is because you can pay taxes on your personal income taxes, and your business will not be taxed. Just to explain the S-Corporation will pass through and will not have to pay federal income taxes at the corporate level. With any business income losses are passed on to the shareholder to report onto their personal income tax. S-Corporation would prevent double taxation and have taxes only paid once that would only be through your personal income tax return. Another reason to choose an S-Corporation is because you would not have to comply with all those complicated rules. As you said, you might want to expand your business to a different state. You also informed me of your assets. The shareholders are free from any debts and business liabilities of the corporation. For instance, your personal bank account or any other assets you own are not in danger to pay off your business debts. This business would have an unlimited continuation if the owner were to die or leave. The reason being is that the company can have stocks and issue them to any potential investors. With investors, the company will be able to raise money for the building on of the business. With the S-Corporation, all the profits would pass through to the owner but as far as control goes the shareholders are in control.

Now that I have made my recommendation I know that you are probably wondering why I did not choose any of the other partnerships or corporations, and here are my reasons.  Let’s start off with partnerships. In a general partnership, you would have to start the company with another individual that means you would have to share the profits with your partner and the capital. The control would be shared with you both. With this type of partnership you handle your partners’ actions, there is an unlimited liability, and each partner handles all debts and obligations. With the limited partnership, you handle all liabilities. The limited partner handles what they invest in the company. The limited partner would get a percentage of the profits in the business, and you would receive the rest of the profits. Then there is the C-Corporation you would only lose what you invested in the business but there is double taxation meaning you would have to file your personal income tax and your business income tax. Just like with an S-Corporation the shareholders are in control of the business. The business can be passed on and the only way the business can be dissolved is in court. Mr. Jackson, the profits for the C-Corporation can retain for the business that is why there is double taxation. Then the last one I am informing you on is a limited liability company the Internal Revenue Service can choose how to tax this company based on what it is. With this type of business, you can lose what you invested. Now with Limited Liability Company most states will allow it to continue if the owner dies depending on what is in the original agreement. Members are in control of the business and can participate in the management of the business. The profits are shared with the members, but it does not retain profits but rather passes through to the owner.

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