Choose one of the following scenarios. For that scenario, identify 3 significant income tax issues they should consider in deciding what type of tax entity they should choose for their proposed new business venture. The tax entity alternatives are partnership (you may choose to specify general partnership or limited partnership), C corporation, or S corporation.

Write an advisory memo or letter to the owners, explaining how each income tax issue affects their decision and your recommendation(s) as to what they should do. You may want to acknowledge other considerations outside of income taxes. Feel free to add or assume information that is not included in the scenario (e.g., costs, sales volume, locations, strategy).

Scenarios

1. Angel, Bree, and Chris are accountants who are each currently working out of their own homes. Angel provides tax services, Bree provides consulting services, and Chris provides accounting advice, hoping to expand into audits if they can build a staff. They are negotiating to combine their practices to start a new accounting firm.
2. Damian and Erick are individuals who each own their own food truck. Damian specializes in sandwiches and onion rings, and Erick specializes in juice-based beverages. They are negotiating to open a new restaurant, while keeping one food truck that sells the most popular items that fit well into the style of a food truck.
3. Jiani and Leann each own 100% of the stock of a manufacturing business. Jiani's business makes office furniture, and Leann's business makes cases, stands, and carrying cases for phones, laptops, and other technology devices.

Criteria for evaluation:

1.  Writing style, clarity of descriptions, spelling, grammar
2.  Correct presentation of tax rules and laws
3.  Significance of tax considerations to the proposed transaction, quality of reasoning, explanation, and recommendations."

Answer rating: 100% (QA)

Memorandum To Angel Bree and Chris From Your Name Tax Advisor Date Date Subject Tax Entity Selection for New Accounting Firm Dear Angel Bree and Chris I am writing to provide guidance on the selection ... View the full answer