Entity Selection

Please categorize each of the following businesses for tax purposes as a: (i) Corporation, (ii) Corporation/Possible S-Corporation, (iii) Tax Partnership, (iv) a sole proprietorship, and/or (v) a Disregarded Entity (or DRE). You should consider the S-election but disregard the “check-the-box” regulations for purposes of this exercise.

  1. Jose and Maria, husband and wife, are starting a bakery as equal co-owners and do not file anything with the state to organize/incorporate their business.
  2. Buddy, Frank and the company Spelling, Incorporated are forming a business as equal co-owners called “Love of Reading, Inc.” by filing articles of incorporation with their state agency.
  3. Corrine, Sherry, and Allison “create a” business by filing articles of organization with the state for Bridgidaire, Ltd., a limited partnership that performs electrical engineering.
  4. James is an accounting student at West Virginia University who prepares tax returns on the side for family members for a fee.
  5. What if James does not file anything with the state or make any elections with the IRS?
  6. What if, after taking a business law class, James decides to organize his tax preparation business into an LLC and files papers with the state to be an LLC?
  7. What if, after one more year of tax preparation, James converts his LLC into a corporation by filing articles of conversion/incorporation with the state?

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