Page 198 - DCOM508_CORPORATE_TAX_PLANNING

Unit 8: Tax Planning for Different Organisations

Questions Notes

1. Study and analyse the case.
2. Write down the case facts
3. What do you infer from it?

Source: Adapted from http://www.opeswealthtrust.ie/self-employedprofessionals/case-study-2-a-self-employed-it-
consultant-for-whom-we-recommended-that-he-incorporate-his-business/

8.5 Summary

A business organisation can be owned and organised in several forms – Sole Proprietorship,
Partnership and Company.

The various forms of organisation are established by state law.
A sole proprietorship is a one-man business.
In a general partnership, the business is owned by two or more general partners.
A company is meant an association of many persons who contribute money or money’s
worth to a common stock and employs it in some trade or business, and who share the
profit and loss (as the case may be) arising there from.

The sole proprietor’s personal income tax return (Form 1040) must include calculation of
the proprietorship’s income tax as well as any income or loss that the owner incurs from
any additional entity, such as an employee, investor, or the like.

A firm is treated as a separate tax-entity under the Income-tax Act.

The partnership firm is taxed as a separate entity, with no distinction as registered and
unregistered fi rms.

Planning of taxes should be done in an efficient manner so as not to jeopardise the business
goals of expansion, profits and growth.

A company owner needs to be aware of anything that might impact taxes paid and for
this self-employment tax, company expenses and deductions, business assets; charitable
contributions, shifting income, and retirement planning are important considerations.

8.6 Keywords

Company: A voluntary association formed and organised to carry on a business.

Limited Liability Partner: He is a kind of partner whose assets will not be lost if the business
goes bankrupt.
Limited Liability Partnership (LLP): A limited liability partnership (LLP) is a partnership in
which some or all partners (depending on the jurisdiction) have limited liability.
Ordinary/General Partner: He is a kind of partner who takes an active part in the running of the
business.
Organisation: An organisation is a social entity that has a collective goal and is linked to an
external environment.
Partnership: A partnership is a strategic alliance or relationship between two or more people.
Sleeping Partner: He is a kind of partner who invests in the business but do not take an active
part in the business.

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