The company and its owners
Company decisions reach beyond the business return. We examine the tax consequences for the organization and its owners, with planning and preparation that account for both.
Consider the business and the household together
A distribution may help an owner fund a purchase while leaving the business short of cash for its next commitment. A compensation change may affect the company’s costs and the owner’s estimated payments. An ownership transfer may bring another entity, trust or family member into the tax work.
We start with the proposed decision and the people affected. The company’s books establish part of the picture; the participating owners’ tax circumstances supply the rest. Looking at those together makes it possible to compare the alternatives before funds move or the terms become final.
What can leave the business?
Reported profit is a starting point, not an answer to the distribution question. Collections, inventory, debt payments and upcoming obligations can change the amount the business needs to retain. The owners’ expected tax payments also belong in the discussion.
For partnerships and S corporations, owners generally report their share of business income whether or not cash is distributed. A cash distribution has its own tax treatment, including basis considerations. We examine tax arising from the business, the consequences of the proposed payment and the cash the business and its owners need to retain.
Shared income, different cash needs
Suppose two individuals each own half of an S corporation and are considering equal cash distributions. Each reports an allocated share of company income. One has already received more cash during the year and has a different stock-basis position; the other has income outside the company and a larger estimated-tax payment ahead.
The company must decide how much cash it can release. Each owner must separately understand the tax on allocated income, the treatment of the proposed distribution and the cash needed for estimated payments. One assumed tax percentage applied to the distribution would obscure those differences.
Planning, returns and the work that follows
The engagement can cover company returns and estimates, owner compensation and distribution questions, related owner returns, or a focused ownership transaction. We identify the work for each taxpayer rather than treating the organization and its owners as one client.
For planning, the output is an explanation of the alternatives reviewed, the expected tax and payment consequences, and the next steps. For preparation, the relevant transactions and records carry into the returns we are engaged to prepare.
Business return preparation
We prepare business returns for the organizations we work with, including partnerships, S corporations, C corporations, trusts and estates filing fiduciary returns, and nonprofit organizations filing Form 990.
Preparation is available on its own or alongside accounting and planning work, and the scope is set out in your engagement letter.
Alongside your existing advisors
We can coordinate with the company’s bookkeeper, finance staff and the owners’ retained advisors. We agree whose work we undertake and what information may be shared. When entity or trust documents are needed, affiliated Hickok Tax Law, PC may be separately engaged for legal implementation. Tax, accounting and legal engagements remain separate.