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Smarter Structure Saves in Legal, Tax Arenas


Michael Hov-destad, associate and corporate attorney with the Marlton-based law firm of Parker McCay, says he sees "large concentra-tions" of businesses forming LLCs to buy commercial and residential real estate, whereas a year ago, consulting businesses dominated new formations. Forming a partnership also offers business owners the pass-through income tax benefit, and it allows for an unlimited number of partners, Navani says, but its owners don't enjoy the limited-liability protection of an LLC.

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									                                                                                                                                                                                                                    TAX PLANNING

Staying Below
The Audit Radar
                                                       Sales-Tax Traps Snare                                                                                                               Smarter Structure
                                                                                                                                                                                            Saves in Legal,
                                                       Unsuspecting Companies
and last-minute rushes are
not among the traits the
Internal Revenue Service
relishes among taxpayers,
                                                                                                                                                                                              Tax Arenas
                                    Steven J. Dundas

according to Mickey Guer-                                                                                                                                                                        Owners should weigh liability
riero, partner and chair of                                                                                                                                                                       and record-keeping issues
the tax practice group at the
Morristown-based law firm
                                                                                                                                                                                                                  By Shankar P.
Day Pitney.
      Guerriero says delays in
filing unemployment tax                                                                                                                                                                 THE CORPORATE STRUCTURE a business chooses has both
returns, sales taxes and                                                                                                                                                                taxation and legal implications, so it’s critical for owners con-
quarterly estimates of tax lia-                                                                                                                                                         cerned about their companies’ bottom lines to examine how
bilities tend to raise red flags.                                                                                                                                                       their operations are set up, industry insiders say.
      “If they are not getting                                                                                                                                                               From a tax-planning standpoint, there are four main types
those returns, it would create                                                                                                                                                          of incorporation: sole proprietorship, a partnership, an S corpo-
some kind of disturbance in                                                                                                                                                             ration and a C corporation.
their computer system,” he                                                                                                                                                                   A sole proprietorship has a single owner, and is the simplest
says. “What happens in such                                                                                                                                                             structure, according to Vinay Navani, a principal at Wilkin &
situations is the tax authority                                                                                                                                                         Guttenplan, an accounting and consulting firm in East
will generate estimated                                                                                                                                                                 Brunswick. Such an entity is not required to file a separate tax
assessments that they think                                                                                                                                                             return — a sole proprietorship’s income is included in its
you should have paid — and                             Mike Hoffman, senior tax manager at Withum, Smith & Brown, says Web-based transactions can make sales-                           owner’s tax filing, he says.
add interest and penalties.”                           tax regulations difficult to determine, because it’s hard to pinpoint the state in which the sale was made.                           “Most people who are not sure if their business will be suc-
      Guerriero says with                                                                                                                                                               cessful choose a sole proprietorship; it’s the easiest to set up,”
many states moving toward                                                                                                                                                               Navani says. However, such businesses are required to maintain
electronic filing, delays could
                                                       Web-based transactions can blur the line for sales-tax regulation
trigger alerts in the tax

                                                                       By Martin C. Daks
authorities’ databases. He                                                                                      Reduce Your Chances
says they are especially sen-
sitive to delays in filing                             AS BUDGET-STRAPPED politicians look for new
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