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John R Orrick JR

John Orrick’s Answers

6 total

  • If I start an LLC in MD and don't do any business do i still have to file the $300 personal property return?

    My concern is having to spend hundreds of dollars each year to file taxes when I haven't even been able to get the business going. Do I need to file state/federal taxes if I don't do anything with the LLC?

    John’s Answer

    Agree with other commentators that you do have to file an annual report and pay the $300 minimum for any LLC formed in Maryland. If you are concerned about paying this amount, but want to conduct business under a unique name, you can file with Maryland State Department of Assessments and Taxation for a trade name. Unlike an LLC, the business owner will enjoy no limited liability protection, but it may be a less expensive option at least until the business starts to take off, at which time you should definitely consider forming an LLC or other limited liability entity.

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  • Is it possible for a for-profit business to accept (and be significantly based) on donations?

    I'm a coach in a sport where I have achieved a certain level of national and international success. I want to develop teams and players in my sport but I need funds for myself and players to offset costs (including my time). Because of my profile,...

    John’s Answer

    Not clear what you are referring to by "for-profit" business. You can certainly form a for profit business, but as noted by other comments above, there may be little incentive for donors to provdie contributions. On the other hand, if you qualify as a Section 501(c)(3) nonprofit, your donors can get tax deductions for their contributions. There are ways to achieve Section 501(c)(3) status from the IRS for organizations that qualify as a "Qualified Amateur Sports Organization." An organization will be a qualified amateur sports organization if it is organized and operated:

    Exclusively to foster national or international amateur sports competition, and

    Primarily to conduct national or international competition in sports or to support and develop amateur athletes for that competition.

    See IRS Publication 527 for more details - Note that filing for tax exempt status is involved and you should probably seek guidance from an experienced attorney.

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  • Hello,This is a slight variation of the typical S-Corp vs LLC question. I formed a LLC and wondering if I should file form 2553

    I started a SMLLC last month. My income would be around $200K/year and my 'reasonable salary' would be easily around $120K if not more. So the social security tax would be same whether I file 2553 or not (since my salary would be above the minimu...

    John’s Answer

    I agree with the other reply that alot will depend on your individual situation. However, to address your last question about additional regulatory burden, yes, there is a large difference in electing S corp status over staying as a SMLLC which is the need to prepare and file federal and state income taxes for the entity every year. As a SMLLC, the entity witll be disregarded unless an election to be taxed as a corp or S corp is filed. This means that the profit and loss of the entity are treated as Schedule C income on the Form 1040 of the individual and no separate tax return is required. By not needing to file these returns, you may find that you will save most, if not all, of the difference in medicare taxes in saved accounting fees (assuming that you can justify taking this position that the entire amount of the income should not be subject to medicare tax which is becoming more difficult all of the time as the IRS is reexamining S corps).

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  • New LLC. When to file Annual Reports

    I just formed a new single member LLC. When should I file my first Annual Report – next year April 15 or or this year June 15?

    John’s Answer

    In Maryland, business entities are required to file Form 1, Personal Property Return, each year to maintain their status in good standing. Generally, you will receive statements from SDAT for personal property reports which are due on April 15, unless you request automatic 2 month extention until June 15. The return lists the personal property owned by the entity as of 12/31/2011. If you formed the LLC in 2012, you would not need to file an annual return/personal property return until April 2013.

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  • How can a minority share-holder of a small business force the company to hold its annual meeting? The charter/by-laws require

    such a meeting, and there are major issues that need to be addressed. Other owners are content to not have said meeting because they don't want the issues addressed.

    John’s Answer

    If the minority stockholders owns 25% or more of the voting shares (or can get together a group of stockholders which together own at least 25% of the voting shares), then the minority can force the corporation to call a special meeting under Section 2-502 for the purpose of addressing the specific issues that are listed on the request by the stockholders.

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  • Help on filing for obtaining an EIN

    We're in the process of applying for an EIN. LLC has been formed. I read that If your business has Investments and produce losses, you want to be able to "pass though" the losses to the owners and so they can claim tax deductions. While if you...

    John’s Answer

    • Selected as best answer

    I would caution against filing as an S corp to "avoid" self-employment taxes. The IRS is aware that there are many advisors to closely-held businesses that tout this as an advantage of S corps; the fact is that unless the owners are paying reasonable compensation which is subject to self-employment taxes and clearly document the distributions to be dividend income rather than compensation, S corps do not provide any advantages over LLCs with regard to self-employment tax. Further, S corps require that each member consent to the election to be taxed as an S corp and limit the type of shareholder that can be included within the entity.

    Another factor to consider is what the source of income is for the business - if it is primarily related to personal services, the likelihood is that all distributions will be considered to be subject to self-employment taxes anyway.

    You are correct that there is an option to elect into corporation status within 2 1/2 months after formation of the LLC by filing Form 8832 with the IRS. As the prior commentator indicated, however, you should consult an experienced attorney and/or accountant to see if you fact pattern would make any sense to consider this option before you go down this road.

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