What is

A disregarded entity is a business that’s not separate from its owner for federal tax purposes—the owner reports and pays the business portion of income and taxes on their tax return. This information is often reported on Schedule C, but you may also find it on Schedule E or Schedule F. Filing Requirements of Disregarded…

Generally, limited liability company (LLC) taxes are reported as a sole proprietor on Form 1040 Schedule C if there is only one owner or on Form 1065 as a partnership if there are multiple owners. Sole proprietors and partnerships are flow-through entities, so the income is taxed on the owner’s tax return. However, it may…

A guaranteed payment is a specified payment that partnerships pay to their partners for service or use of capital (as if they were made to a person who is not a partner). These payments are made without any regard for the profits of the partnership. The goal of paying guaranteed payments is to assure that…

The accumulated earnings tax (AET) is a penalty imposed by the IRS on corporations for keeping earnings for longer than they need to run their businesses rather than paying out dividends to shareholders. The goal of the tax is to discourage corporations from accumulating excessive funds to avoid shareholder-level taxes. Corporations can avoid being exposed…

What makes an S corporation (S-corp) salary reasonable depends on several factors, such as the type of work being done, business standards, and company profit. Setting a reasonable salary is important for operating an S-corp and also keeps the IRS from reclassifying your distribution and exposing you to penalties, interest, and additional taxes. Factors Affecting…