Acct 401/402 Income tax i & ii

Welcome! In these courses, we will focus our attention to first, the individual's taxation guidelines and processes and then to the business processes. This course packet entails links to essential resources that you will need to complete this course. Taxation is a necessary evil that will be a prominent part of your personal life as well as business career. For this reason, we will explore the expansive taxation material from the viewpoint of an individual as well as an accounting professional. The material and application of this course is challenging, but with determination, it is an enlightening topic.


Who cares about taxes? We all do! Everyone from individuals, businesses, politicians, etc... Unfortunately or fortunately, depending on your view of government, taxes often are a deciding factor in many of our choices as a citizen or as a business. As an individual, this course will show you how you should care about taxes for a variety of reasons.


Income Tax II deals with taxation at the business level. We start with a review with the different business entities that you find most common in the United States. Each unit, we will discover the advantages and disadvantages of each formation. We will learn how to process the forms as well as how to critically think through challenging tax issues.


The most common entity types in our discussions are sole proprietor, partnership, corporation, s corporation, and others that are hybrids like a limited liability company.

Sole proprieter

This is the easiest of all the formations to start, but also the most vulnerable. There are no forms to process for this election, no fees to pay, and no approval from any government agency. It is, however, sometimes the riskiest when it comes to the protection of the owner's own assets. There is no limited liability in this case. What does that mean? It means that the owner's own personal assets and credit are at stake if the business fails or if it goes through some type of litigation. Keep in mind to check with the state of operation for any additional information on this formation. For example, in the State of Indiana, a Certificate of Assumed Business Name must be filed with the local county clerk if you are operating under a name different than your own.


definitely can be easily formed like Sole Proprietors, but since they involve more than one person or business, it is best to safeguard with the advice of lawyers and most definitely a partnership agreement. The involvement of each partner differs among these formations. Not only can partners have different activity levels, but they can have different liabilities and different contributing assets that determine what type of profits and losses they will assume.


Limited Liability Companies really are a hybrid between sole proprietorship and corporations. They have unique elements of each that make it popular choice. This is a formation that must be filed through the state. It has the tax advantage of a sole proprietor and the limited liability of a corporation .


Corporations are a unique formation because they become their own entity. This protects owners from a variety of losses from business operations. The disadvantage is double taxation. The corporation is taxed at two levels, the corporate level and the shareholder level.

S Corps

S Corps are a variation of a corporation, a special election. A business must be a corporation before it can elect to be an s corp. The election requires certain qualities be met before election. There are restricted number of owners, restricted stock, as well as other specialties to become an s corp.


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