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My husband and I r investing family member new beauty salon.

Not yet determined whether it...
My husband and I r investing family member new beauty salon. Not yet determined whether it will be llc or corp. we will be non working investor with only 2 to 3 others. We have decided to take equity stake rather than become a creditor. What are some of key issues we need to consider?
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Answered in 21 minutes by:
5/17/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,592
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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MyVirtualCPA : Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.
MyVirtualCPA : When you are an equity owner in the firm, you will pay tax on dividends you receive from the company
MyVirtualCPA : this is if you are a corporation
MyVirtualCPA : If you are an LLC you will pay for your portion of the profits and losses on your personal income tax return
MyVirtualCPA : So, you will need to decide which tax structure you prefer. With a corporation you will have double tax - once when you pay the actual income tax and again when you pay tax on dividends individually
MyVirtualCPA : If you are not materially participating in the LLC, then this will be passive income and you will only be able to deduct passive losses against other passive income streams. However you will still owe tax on any passive income
MyVirtualCPA : Is there any other questions you have?
MyVirtualCPA : If not, please rate my response as "excellent" so that I may receive credit for assisting you today
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,592
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Megan C
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Category: Tax
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Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

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