LLCs and tax filing

Ilyce Glink and Samuel J. Tamkin for the Chicago Tribune Real Estate Matters write:  Question: I heard you talking on the radio about limited liability companies (LLCs). I'm a CPA and thought you'd like to know that LLCs can take three different forms for tax filing. If it's a one-member LLC, it is what the IRS calls a disregarded entity, and the income and expenses are reported on Schedule C or E of a person's tax return -- so no extra tax return is needed. If the LLC has more than one member, it can be filed as a partnership or, if a form is completed the LLC may elect to file as a C corporation or make another election and file as an S corporation.

Answer: Thank you for that information. When Ilyce gets most of her calls about LLCs, they generally ask about forming an LLC to own real estate. In our column, we also generally deal with this issue from the perspective of how some people elect to hold title to their real estate investments. Your comment goes to the heart of another issue concerning LLCs: the federal tax issue.

Once you've decided to own real estate in an LLC, you will then need to decide how you want that LLC treated for federal income tax purposes. As you pointed out, if you are the only owner of the LLC, your situation might allow you to own various properties, and each of those properties might be owned by its own LLC. Since the IRS would ignore the LLC for tax purposes, the income and losses from the real estate properties would flow to that person's tax return. As you pointed out, that income might flow to Schedule C of a tax return. Schedule C is the form that deals with profits and losses from business.

Frequently, small business owners carry on their activities and for one reason or another they report that business activity on Schedule C.

On the other hand, IRS form Schedule E relates to supplemental income and losses. Depending on what income and losses you are reporting, you might need the assistance of a computer program or an accountant to help you when it comes to reporting income and losses from real estate to the IRS on a personal tax return.

Having said that, if the LLC has multiple owners -- generally more than just a husband and wife -- the IRS will need to treat that LLC as a separate entity with its own Tax Employer Identification Number. At this point, the owners of the LLC would have to decide whether they want the LLC to act more like a partnership or a corporation.

If the LLC wants to be treated like a partnership, it will file a tax return with the federal and state governments but the profits and losses will flow to the partners. That means that the LLC may not have income taxes to pay and any federal and state income taxes would be paid by the owners of the LLC on their personal tax returns. Here again, depending on who owns the LLC, how they participate in it, and other factors, those profits and losses may cause a personal income tax return to get quite complicated with a number of additional schedules to be completed.

Now, if the LLC wants to be treated as a corporation, it would pay all federal and state income taxes just as any other large corporation would. The LLC could also be treated as a Subchapter S corporation that would allow the owners to report profits and losses of the LLC in a similar manner as a partnership. However, Subchapter S corporations have greater restrictions on how many people can own the company, along with other limitations.

Essentially, many if not most owners of investment and commercial real estate will choose to own their real estate in LLCs and have the IRS treat the LLC as a partnership or as a disregarded entity.

Thanks for your comment. [end]

(Ilyce Glink is the creator of an 18-part webinar and ebook series called "The Intentional Investor: How to be wildly successful in real estate," as well as the author of many books on real estate. She also hosts the "Real Estate Minute," on her YouTube.com/expertrealestatetips channel. Contact Ilyce and Sam through her website,http://www.thinkglink.com.)

5 Mobile Accounting Platforms Perfect for Small Business

Kristin Crosier for www.business-software.com writes: These days, we want access to everything at our fingertips, immediately. And with modern technology that’s not only possible, it’s preferred – for business needs and personal activities alike.

Money management tools are no exception. Whether to track our business expenses or manage our individual spending habits, we seek the comprehensivity of an accounting software platform in a touch-friendly smartphone app that we can use anywhere, anytime.

Small Business Needs and the Mobile Accounting Landscape

Of course, it’s no surprise that small businesses are reaping the benefits of mobile-friendly finance tools. Many advantages of mobile apps are readily apparent: they’re easily accessible and user-friendly, they don’t require time-consuming maintenance or installation processes, and they offer lower costs that are great for companies with less capital to spare.

Yet for SMBs, the expansion of financial apps offering robust accounting capabilities means more than affordability and convenience. This market space provides smaller companies with access to accounting software in the manner most beneficial to them – handily on their tablet or smartphone and free of unnecessary gadgets, gizmos and restrictions.

5 SMB Accounting Tools for Your Mobile Device

Don’t concede to QuickBooks just yet, small business owner. We’ve rounded up 5 mobile-friendly accounting and financial management apps you should consider for your business needs. Each of the accounting tools we profile comes at a bargain-bin price (with full functionality), ranging from free(!) to less than your monthly latte budget. Simply scroll down to find your key needs, or browse by intended user, pricing, preferred device and more.

For budget-friendly financial management… try Wave

Who Should Use It: Small business owners in need of a comprehensive yet amateur-friendly accounting solution
Why We Like It: Wave accounting is the perfect option for startups and very small businesses with literally no budget for finance tools. The platform offers comprehensive modules for accounting, invoicing, payments, payroll and receipts. For companies in need of a combination of such tools, the complete integrative capabilities Wave offers can be more effective than juggling different SMB-friendly platforms.

• The Feature You’ll Love: Build professional-looking reports on everything from accounts payable to sales tax, which you can distribute to investors
• Which Devices Is It Best For? Desktops, tablets
• What Will It Cost You? Free

For affordable time-tracking and invoicing… try Monchilla

Who Should Use It: Small businesses who seek a fully functional online accounting platform with time-tracking, invoicing and payroll capabilities
Why We Like It: With a simple pricing model and comprehensive accounting functionality, Monchilla addresses all of your core accounting needs at a price that won’t break the bank. This online accounting tool is also fully mobile compatible, making it an affordable alternative to QuickBooks Online. If, however, you need to keep your QuickBooks account, that’s not a problem either – Monchilla can integrate with or replace QuickBooks, depending on your preference.

• The Feature You’ll Love: Test-drive business decisions before making them with business navigation tools
• Which Devices Is It Best For? Desktops, iPad and other tablets
• What Will It Cost You? $5 a month per company, plus $5 monthly per employee for payroll

For simplified business accounting… try FreshBooks

Who Should Use It: Small businesses with little to no accounting experience that are in need of a dynamic finance management tool
Why We Like It: FreshBooks addresses all core accounting functions with comprehensive features for invoicing, tax, expense and time tracking. An impressive bundle of features includes must-haves such as sales taxes, automatic expense imports, team timesheets and a portal for clients. Quality customer support also makes this platform ideal for inexperienced accountants; customer service representatives are available Monday through Friday. With the FreshBooks app your account is always accessible, whether you’re on the go or at your desk.

• The Feature You’ll Love: An extensive network of add-ons lets you tweak your FreshBooks account to fit your specific finance needs
• Which Devices Is It Best For? Desktops, tablets, all mobile Apple and Android devices
• What Will It Cost You? Nothing for the free edition, $19.95 (or more) a month for a paid version

For streamlined mobile bookkeeping… try Skyclerk

Who Should Use It: SMBs looking for an easy-to-use mobile bookkeeping tool
Why We Like It: Skyclerk transforms complex accounting and bookkeeping tasks into simple and manageable activities, thanks to its streamlined dashboard. Upon logging in, all income and expenses are immediately visible to the user, and new account items can be added with a single click. Contact management, real-time updates and custom reports also help to enhance and simplify your bookkeeping efforts. Skyclerk also has plans to add invoicing and estimating capabilities in the near future.

• The Feature You’ll Love: Dashboard displays an updated list of all account activity organized by date, with option to add notes and attach files for each listing
• Which Devices Is It Best For? Desktops, all mobile Android and Apple devices
• What Will It Cost You? Nothing for the basic plan, $15 a month for the premium version

For efficient, collaborative accounting… try Kashoo

Who Should Use It: SMBs who want to exert minimal effort managing their accounts and intend to couple their software with the services of a professional accountant.
Why We Like It: The Kashoo accounting system offers a range of tools to help you better manage your finances: quick-entry expense and income recording, simplified invoicing and detailed finance reports. Kashoo’s fully functional iPad app provides total access to each of the platform’s tools and capabilities, making it ideal for the entrepreneur or business owner who is always on the move. Another notable advantage to using Kashoo is the company’s commitment to customer support: you can get help by phone, email, live chat and social media.

• The Feature You’ll Love: Easily share and collaborate with your business partner or employees
• Which Devices Is It Best For? Desktop, iPad and other tablets
• What Will It Cost You? $20 a month

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Xero’s secret sauce / a View From Ireland

Denis Breen is managing director of ProfitPal, an accounting firm headquartered in Ireland writes: A few years ago if someone told you there was an imminent threat to the dominate SME accounting software providers in the market you might have thought – no chance! How could someone undermine the market domination of SAGE, MYOB and Intuit, these companies have owned this space for the past 20 years. Every company that looked even remotely close to threatening them was bought and either painted a nice shade of their respective colours or binned to eliminate the treat.

The difficulty with dislodging the incumbent is the same in any industry; they have the high ground, the existing market users, the re-sellers, the resources. Its nigh on impossible to dislodge incumbents, until and unless a shift in technology changes the game entirely and either makes them instantly or slowly irrelevant. This is the treat facing Sage in the UK, MYOB in Australia and Intuit in the States. These three giants of the accounting software industry are being stared down by a little upstart from New Zealand called Xero.

Sage may be the dominant player in these waters, but time is running out. Compared to Xero, Sage and Intuit are flat-lining.

Xero has made massive inroads in all three markets as a result of the massive shift in technology brought about by Cloud Computing. Its enabled them to offer a product with a whole load of secret sauce included.

So what’s the secret sauce?

1. Real-time Bank feeds via Yodlee
2. Electronic bank reconciliation something akin to playing snap with your kids
3. Incredibly well thought out simplicity applied to every aspect of the system
4. Online – so anywhere for anyone
5. Monthly reporting that encourages the user to look and keep looking
6. An open API that allows hundreds of specialised partners to plug their systems into Xero
7. Accountants layer encourages practices to on-board their existing clients
8. Real-time accounts change the conversation between owners and accountants from last year to now and the future. This brings a sales and marketing edge to adopting practices

We’re a Xero oriented practice now but that wasn’t always the case, and it’s because of the points above that we changed entirely. We’ve seen the significant benefits Xero has brought to our clients and to us.

The incumbents have responded in typical fashion, slowly! Most have launched some form of substandard online or hosted solution but these are simply defensive measures to tell their customers, we’re in this space also –  don’t leave – please. Most likely the incumbents internal conflicts will prevent them from reacting with a credible competitive offering to Xero.

My guess is that if there is any company who will give Xero stiff competition it will be Intuit (QuickBooks) – .

It’s going to be an interesting play-out.   Visit ProfitPal Here. 

Invitbox / the world’s first online automatic data-extraction mailbox for receipt, approval and storage of supplier bills - Acquired by Intuit

Invitbox writes: I was once told I had a tendency to make communications longer than they needed to be.  And, that if I did that in the future, I should announce at the start of the communication that it was a really REALLY important one.

This is one of those really REALLY important ones!

Today, I’m excited to announce that invitco is being acquired by Intuit, providers of QuickBooks Online (amongst other things), the world’s best-selling cloud-accountancy software for small business.

Life is funny, and sometimes it’s predictive. Back in early February we published the whitepaper “The Future of Accounting – The Rise of the Machines.”

The paper attempted to predict where the accounting profession might be in 20 years, and I made a case for industry change (after rambling on for multiple pages of course). At the end of the paper, I made this seemingly innocuous comment: “The Future of Accounting software?  Well, that’s a topic for another day.”

Little did I know that “another” day would come so soon.  For invitco, it’s the most important day in our history … and our future.

Over the past year Intuit has been building its presence in Australia and we are thrilled to become part of that team, bringing to it the local knowledge, opinion and advice that you have all given us over the last three years.

But just to reassure you, we will still be here to service your accounts payable needs.  Our telephone number remains the same, so you’ll still be able to reach us.

All the buttons that you see in invitbox will remain. Along with Intuit, we are committed to an open API approach, allowing you to continue to choose which accountancy software you feel is right for you.  We will continue to advise you on your AP solution, and we will continue to work toward improving and expanding our functionality.

We have great admiration for Intuit.  What unites Intuit and invitco is our shared vision and approach to the future of accounting and bookkeeping.  We will continue to develop technology solutions that contribute in some small way to freeing accountants and bookkeepers from performing repetitive tasks so they can focus on more strategic value and services for their clients.  That sits very nicely with Intuit’s focus on enabling them to save time and grow their practices.

So who better than Intuit to join us on our quest to make the future of accounting and bookkeeping paper-free and data entry-free?

We’ve already started to work with the Intuit team and we’re all very excited about our future.  Together, Intuit and invitco will enable more and more businesses to shift their accounting practices online.

Pretty exciting times ahead…

We’ll share more as the deal closes and as we chart our course. In the meantime, send any questions to hello@invitco.com.  But don’t be afraid to pick up the phone or send us emails if you want to chat.

Don’t be a stranger…Invitbox