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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.
- 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.
- 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.
- 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.
- James is an accounting student at West Virginia University who prepares tax returns on the side for family members for a fee.
- What if James does not file anything with the state or make any elections with the IRS?
- 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?
- 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?