Helping businesses and individuals alike build and retain wealth for generations to come, one solution at a time.

Transcription

1 Helping businesses and individuals alike build and retain wealth for generations to come, one solution at a time.

2 Enter Business Structures in search window

3 Click on IRS Business Structures

4 IRS Instructions on Forming a Business

5 From here enter 1041 Tax Form in search window 1041 Tax Form

6 Click on Form 1041

7 1040 TAX FORM 1041 TAX FORM

8 LLC COMPANY INCOME Multi-Member LLC An LLC is the preferred business structure due to no taxation on entity. Only members/owners are taxed on the portion to be distributed to them. COMPANY EXPENSE Deductible Expenses Incurred By LLC. Members will deduct on 1040 tax form the % of ownership of LLC. TAXABLE INCOME Income that would be taxed you personally if you were the only member in LLC LLC MEMBERS/OWNERS BUSINESS TRUST: 98% $500K 98% $490K YOU: 2% $500K 2% $10K Operating Agreement In this example the Business Trust income is 98% or $490,000. As an individual you will file a 1040 tax form with income 2% or $10,000.

9 LLC COMPANY INCOME COMPANY EXPENSE TAXABLE INCOME LLC MEMBERS/OWNERS BUSINESS TRUST: 98% $500K 98% $490K INCOME DISTRIBUTION (You/Individual 1065/K1) Personal Income (W-2) (Files 1040) Tax Form $10,000 SCHEDULE C (profit & loss) Adjusted Gross Income (AGI) SCHEDULE A (30% of AGI Charitable deduction) Taxable Income YOU: 2% $500K 2% $10K

10 LLC COMPANY INCOME INCOME DISTRIBUTION (You/Business Trust 1065/K1) Business Trust COMPANY EXPENSE $490,000 TAXABLE INCOME Files 1041 Tax Form LLC MEMBERS/OWNERS BUSINESS TRUST: 98% $500K 98% $490K YOU: 2% Personal Income $10,000 Files 1040 Tax Form $500K 2% $10K

11 LLC COMPANY INCOME COMPANY EXPENSE TAXABLE INCOME Business Trust (1041 Tax Form) Business Trust (Files 1041 Tax Form) $490,000 $100,000 $390,000 INCOME (Line 9) DEDUCTIONS (Line 15a) NET INCOME (Line 18) LLC MEMBERS/OWNERS BUSINESS TRUST: 98% $500K 98% $490K YOU: 2% $390,000 DISTRIBUTION (100% line 18) Zero Tax Liability K-1 $500K 2% $10K

12 BUSINESS TRUST NAME EIN BUSINESS TRUST 1041 Tax Form Illustrating location to input Income, Expenses, & Distribution. INCOME EXPENSES DISTRIBUTION

13 BUSINESS TRUST NAME EIN BUSINESS TRUST 1041 Tax Form Illustrating location to input Income, Expenses, & Distribution. $490,000 INCOME $100,000 EXPENSES $390,000 $0 DISTRIBUTION Net Income $490,000 Minus Expense $100,000 Net Income $390,000 Income Distribution = $390,000 *Zero Tax Liability

14 BUSINESS TRUST BUSINESS TRUST Income $490,000 Minus Expense $100,000 Net Income $390,000 Income Distribution $390, % EIN Files 1041 Tax Form (line 18) Trustee Tax Liability = $0 K-1

15 FAMILY TRUST FAMILY TRUST Income $390,000 Minus Expense $100,000 Net Income $290,000 Income Donated $290, % EIN Files 1041 Tax Form (line 13) Trustee Tax Liability = $0 LIFE INSURANCE K-1

16 FAMILY CHARITABLE TRUST FAMILY CHARITABLE TRUST Income $290,000 Minus Expense $100,000 Net Income $190,000 Income Donated $190, % EIN Files 1041 Tax Form Trustee Donation (line 13) Tax Liability = 0 Must be donated to a 501 (C) (3)

17 PRIVATE FAMILY FOUNDATION Non-Operating 501 (C) (3) PRIVATE FAMILY FOUNDATION Donations Received $190,000 Minus Expenses $50,000 Net Donation $140,000 5% of Net Donation $7,000 Balance Retained $133,000 Foundation Received Donation from Charitable Trust Trustee files 990 PF for Foundation ( information form only)

18 PRIVATE FAMILY FOUNDATION DONATING ENTITIES FOUNDATION INDIVIDUALS C-CORPORATIONS S-CORPORATIONS CHARITIES FOUNDATIONS RECEIVE DONATIONS INVESTMENTS EQUITY OWNERSHIP ASSETS ENDOWMENTS EXPENSES Files a 990 PF C O M M U N I T Y FEDERAL GOVERNMENT 5% EXPENSE TRUSTS TRUSTEE 501(C) (3) LETTER ETC. G O O D

19 EXAMPLE FOUNDATION FLOW CHART PRIVATE FAMILY FOUNDATION Total Donations Received: $1,000,000 From Charity: $133,000 LLC ASSETS ASSETS Real Estate Purchased: $800,000 BUSINESS TRUST Net Donations: $200,000 Loan CORPORATION Total donations include $133,000 received from the Family Charitable Trust. Assets are not subject to law suits. Real property is not subject to property tax in most counties. Income to the Foundation is received tax exempt. The Foundation can invest or loan to business entities.

20 BUSINESS TRUST Income $490,000 Minus Expenses $100,000 Minus Distribution $390,000 Income Distributed $390, % EIN Files 1041 Tax Form (line 18) Trustee Tax Liability = $0 COMPLETE TRUST SERIES FAMILY TRUST Income $390,000 Minus Expenses $100,000 Net Income $290,000 Income Donated $290, % EIN Files 1041 Tax Form (line 13) Trustee Tax Liability = $0 LIFE INSURANCE FAMILY CHARITABLE TRUST Donated Income $290,000 Minus Expenses $100,000 Net Donated Income $190,000 Income Donated $190, % EIN Files 1041 Tax Form Trustee Donation (line 13) Tax Liability = $0 PRIVATE FAMILY FOUNDATION Donations Received $190,000 Minus Expenses $50,000 Net Donation $140,000 5% of Net Donation $7,000 Balance Retained $133,000 Foundation Received Donation from Charitable Trust Trustee files 990 PF ( information form only) LIFE INSURANCE

21 Schedule K-1 (Form 1065) Schedule K-1 (Form 1065) LLC TO TRUST FLOW CHART LLC COMPANY INCOME COMPANY EXPENSE TAXABLE INCOME LLC MEMBERS/OWNERS BUSINESS TRUST: 98% $500K 98% $490K BUSINESS TRUST Income $490,000 Minus Expenses $100,000 Minus Distribution $390,000 Balance Distributed $390,000 K-1 FAMILY TRUST Income $390,000 Minus Expenses $100,000 Net Income $290,000 Donated Income $290,000 K-1 FAMILY CHARITABLE TRUST Donated Income $290,000 Minus Expenses $100,000 Net Donated Income $190,000 Total Donated $190, % EIN Files 1041 Tax Form (line 18) Trustee Tax Liability = $0 39.6% EIN Files 1041 Tax Form (line 13) Trustee Tax Liability = $0 39.6% EIN Files 1041 Tax Form Trustee Donation (line 13) Tax Liability = $0 YOU: 2% $500K 2% $10K FILES 1040 TAX FORM $10,000 PRIVATE FAMILY FOUNDATION Donations Received $190,000 Minus Expenses $50,000 Net Donation $140,000 5% of Net Donation $7,000 Balance Retained $133,000 Foundation Received Donation from Charitable Trust Trustee files 990 PF ( information form only)

22 PROFESSIONAL LIMITED LIABILITY COMPANY FLOW CHART NEVADA OR WYOMING PLLC FROM CAL PLLC: $245,000 BUSINESS TRUST (98% OWNER) $240,100 CALIFORNIA PLLC NET PROFIT: $500,000 PLLC (49% OWNER) $245,000 Total Taxable Income: $139,000 DOCTOR (2% OWNER) $4,900 FILES 1040 TAX FORM 1040 INCOME $259,900 DOCTOR (51% OWNER) $255,000 Taxable Income Without Trust/Foundation Series: $500,000 K-1 FOUNDATION DONATION 30% of 1040 AGI ABC TRUST Income $240,100 Minus Expenses $50,000 Minus Distribution $190,100 Balance Distributed $190,100 FAMILY TRUST Income $190,100 Minus Expenses $50,000 Net Income $140,100 Donated Income $140,100 FAMILY CHARITABLE TRUST Donated Income $140,100 Minus Expenses $50,000 Net Donated Income $90,100 Total Donated $90,100 PRIVATE FAMILY FOUNDATION Donations Received: $60,000 $90,100 Minus Expenses $50,000 Net Donation $100,100 Balance Retained $95,095 Taxable Income Assuming: Schedule A is $70,000 Schedule C is $50,000 $120,000 Taxable Income: $380,000 *There is a 5% mandatory minimum expenditure of net donation required to build and maintain the Private Family Foundation ($5,005 in the example above).

23 FILES 1040 TAX FORM W-2 WAGE EARNER TOTAL INCOME $200,000 -Schedule A (Itemized deductions) -Schedule C (Profit & Loss) Assume - 25% A & C ($50,000) AGI $150,000 30% AGI Donated to Foundation -($45,000) 1040 Taxable Income With Foundation $105, Taxable Income Without Foundation $150,000 ABC TRUST Income $0 Minus Expenses $0 Minus Distribution $0 Balance Distributed $0 FAMILY TRUST Income $0 Minus Expenses $0 Net Income $0 Donated Income $0 FAMILY CHARITABLE TRUST Donated Income $0 Minus Expenses $0 Net Donated Income $0 Total Donated $0 PRIVATE FAMILY FOUNDATION Donations Received: $45,000 Minus Expenses $2,250 Net Donation $42,750 Balance Retained $42,750 *There is a 5% mandatory minimum expenditure of net donation required to build and maintain the Private Family Foundation ($5,005 in the example above).

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