Mark A Wood. Tracy Ellingson. Kent,

Transcription

1 Tracy Ellingson From: Sent: To: Subject: Attachments: Mark Wood Saturday, May 27, :01 AM Kent Vickre 5-6 Mark Wood, K-State Farm Management Class Guest lecture Materials 2016 KSU Farm & Ranch Mgt Class #2.pptx; 2016 KSU Farm & Ranch Mgt Class #2--Handouts.pdf Kent, I also do an annual trek to K-State to guest lecture a undergraduate farm management class on the topic of business entities and their applications. If you think it is useful or fits, go head and use it. Mark A Wood Extension Agricultural Economist Kansas Farm Management Assoc., NW PO Box West 4 th Colby, KS Cell: Office: Fax:

2 Business Entity Basics Presented by: Mark A. Wood Ext. Ag. Economist, KFMA, NW

3 What is a Business Entity? Give me some examples of Entities? Which one do you think is the most common? Which one is the easiest to start and end? Is it easy to determine the right one? Why set up a formal business entity?

4 Why set up a Business Entity Structure: Continued.. Partitioning return to Labor, Management & Capital? Income tax Planning? Estate Planning? Generation Transfer Labor Management Capital This may require multiple business entities?

5 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult* Difficult*

6 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult

7 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES

8 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES* YES* YES

9 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES* YES* YES Medical Expenses? YES* NO NO/MAYBE MAYBE* YES

10 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO*

11 50% Comparison of Income and Tax Brackets 2015 Married Filing Joint Rates 45% 40% Corp Tax 35% 30% 25% 20% 15% LT Capital Gains 10% 5% 0% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 Taxable Income Federal SE State Cap Gain Corp

12 50% Comparison of Income and Tax Brackets 2015 Married Filing Joint Rates 45% 40% 35% 30% 25% 20% 15% 10% 5% LT Capital Gains ACA Surtax 0% $0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250 $275 $300 $325 $350 $375 $400 $425 $450 Taxable Income Federal SE State Cap Gain ACA Surtax

13 Comparison of Trump Tax Plan Income and Tax Brackets 2017& Future? Married Filing Joint Rates 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% $0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250 $275 $300 $325 $350 $375 $400 Taxable Income Federal SE State Cap Gain Corp

14

15 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO* Liability Protection? NO NO <NO/YES> YES YES

16 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO* Liability Protection? NO NO YES YES YES FSA Friendly YES YES NO NO NO

17 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO* Liability Protection? NO NO YES YES YES FSA Friendly YES YES NO NO NO Flexible Income Allocation? YES YES YES NO NO

18 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO* Liability Protection? NO NO YES YES YES FSA Friendly YES YES NO NO NO Flexible Income Allocation? YES YES YES NO NO Banker Friendly (collateral)? YES YES Less NO NO

19 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO* Liability Protection? NO NO YES YES YES FSA Friendly YES YES NO NO NO Flexible Income Allocation? YES YES YES NO NO Banker Friendly (collateral)? YES YES Less NO NO Access to Profits? (cash) YES YES YES YES NO

20 Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO* Liability Protection? NO NO YES YES YES FSA Friendly YES YES NO NO NO Flexible Income Allocation? YES YES YES NO NO Banker Friendly (collateral)? YES YES Less NO NO Access to Profits? (cash) YES YES YES YES NO Liquidation Difficulty Less More More More High

21 The Love

22 Comparison of Entity Characteristics: STRENGTH LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO* Liability Protection? NO NO YES YES YES FSA Friendly YES YES NO NO NO Flexible Income Allocation? YES YES YES NO NO Banker Friendly (collateral)? YES YES Less NO NO Access to Profits? (cash) YES YES YES YES NO Liquidation Difficulty Less More More More High

23 Comparison of Entity Characteristics: CAUTION LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO* Liability Protection? NO NO YES YES YES FSA Friendly YES YES NO NO NO Flexible Income Allocation? YES YES YES NO NO Banker Friendly (collateral)? YES YES Less NO NO Access to Profits? (cash) YES YES YES YES NO Liquidation Difficulty Less More More More High

24 Comparison of Entity Characteristics: REVIEW LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO* Liability Protection? NO NO YES YES YES FSA Friendly YES YES NO NO NO Flexible Income Allocation? YES YES YES NO NO Banker Friendly (collateral)? YES YES Less NO NO Access to Profits? (cash) YES YES YES YES NO Liquidation Difficulty Less More More More High

25

26 Business Entity Applications: Crop & Livestock Production Machinery & Livestock Gen 1 & 2 &? (on farm) Gen 1 & 2 &? (on farm) LLC Partnership/ S-Corp? (LLC?) C-Corp? Land Gen 1 & 2 &? (on & off farm) LLC Partnership

27 Time for a Quiz?

28 What is a Business Entity? Give me some examples of Entities? Which one do you think is the most common? Which one is the easiest to start and end? Is it easy to determine the right one? Why set up a formal business entity?

29 KFMA Association Membership Map & Office Locations $ 2,971 $8,903 $ 36,515 $11,452 $ 11,777 $37,423 $ 9,730 $15,119

30 Thank you Questions?

31 What is a Business Entity? Business Entity Basics Give me some examples of Entities? Which one do you think is the most common? Which one is the easiest to start and end? Presented by: Mark A. Wood Ext. Ag. Economist, KFMA, NW Is it easy to determine the right one? Why set up a formal business entity? Why set up a Business Entity Structure: Continued.. Partitioning return to Labor, Management & Capital? Income tax Planning? Estate Planning? Generation Transfer Labor Management Capital Comparison of Entity Characteristics LLC S-Corp C-Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO* This may require multiple business entities?

32 50% Comparison of Income and Tax Brackets 2015 Married Filing Joint Rates 50% Comparison of Income and Tax Brackets 2015 Married Filing Joint Rates 45% 45% 40% Corp Tax 40% 35% 35% 30% 30% 25% 25% 20% 15% 10% 5% 0% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 Taxable Income Federal SE State Cap Gain Corp LT Capital Gains 20% 15% 10% 5% 0% LT Capital Gains ACA Surtax $0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250 $275 $300 $325 $350 $375$400$425$450 Taxable Income Federal SE State Cap Gain ACA Surtax 50% 45% Comparison of Trump Tax Plan Income and Tax Brackets 2017& Future? Married Filing Joint Rates Comparison of Entity Characteristics: REVIEW LLC S-Corp C-Corp 40% 35% 30% 25% 20% 15% 10% 5% 0% $0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250 $275 $300 $325 $350 $375 $400 Taxable Income Federal SE State Cap Gain Corp Startup? Easy Simple Challenging Difficult Difficult Accounting? Easy Challenging Difficult Difficult Difficult Fical Year-end? NO NO NO NO YES Health Ins. Deduction? YES YES YES YES* YES Medical Expenses? YES* NO NO MAYBE* YES Taxes: Income YES YES YES YES YES Self Employment YES YES YES NO* NO* Liability Protection? NO NO YES YES YES FSA Friendly YES YES NO NO NO Flexible Income Allocation? YES YES YES NO NO Banker Friendly (collateral)? YES YES Less NO NO Access to Profits? (cash) YES YES YES YES NO Liquidation Difficulty Less More More More High

33 Business Entity Applications: Crop & Livestock Production Machinery & Livestock Gen 1 & 2 &? (on farm) Gen 1 & 2 &? (on farm) LLC Partnership/ S-Corp? (LLC?) C-Corp? Time for a Quiz? Land Gen 1 & 2 &? (on & off farm) LLC Partnership