TAX 655 2-1 Final Project Milestone One

1

Running Head: Business entity e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e

Business Entity: Milestone One – Memorandum

Business entity e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e 2

Subject: Recommendation for ideal business entity type

A. Justification for choosing the recommended taxable entity

On the basis of the tax research that has been conducted, the most viable business entity option for

Bob Jones is a partnership form of business. In a partnership, two or more individuals combine

their resources in order to carry out business activities. By choosing this business type Bob and

his daughter Mandy would be able to share the risks as well as profits and losses of the newly

formed business. Based on the business type, the tax would be computed as personal tax, and they

of advantages for the new entity. The accrual method of accounting would be adopted, which

would ensure that the company can record the income, regardless of when the actual cash is

received by it. It would help to give a true and fair picture of the financial position of the entity

(Surepno, 2015). The cost of preparing the income tax returns would be negligible as Mandy

already pays for her personal tax. The same process would be adopted in the case of the

partnership form of business. A major benefit of the partnership method is that the business would

have to pay the tax amount only once, and thus, there is no issue pertaining to double taxation.

The partners, i.e., Bob and Mandy, would not be taxed as entities but as individuals (Leonard,

2022). However, a major concern is that the members would be held personally liable in case of

Business entity e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e 3

any loss or financial obligations. The employees would be able to enjoy a number of benefits in

the business entity in the form of retirement benefits, insurance benefits, etc.

principle of taxation, in the specific context, Bob and Mandy would have to pay the tax just as one

has to pay tax on their personal income. They would have to abide by the guidelines that have

been laid down by the Internal Revenue Service. For instance, Form 1065 would have to be used

by them in order to report their income along with other adjustment figures relating to deductions,

as well as credits. The partnership business entity can give rise to a major advantage from the

taxation perspective.

Reference

Agarwal, A., Chen, S., & Mills, L. F. (2021). Entity structure and taxes: An analysis of embedded

pass-through entities. The Accounting Review, 96(6), 1-27.

Leonard, K. (2022, October 21). 7 partnership advantages in 2023. Forbes. Retrieved February

Business entity e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e 4

https://www.irs.gov/businesses/partnerships#:~:text=A%20partnership%20must%20file%2

0an,or%20losses%20to%20its%20partners.