Discover the Legitimacy of Online Signature for Assignment of Partnership Interest in the United States

How to eSign a document: online signature legitimateness for Assignment of Partnership Interest in United States

in this video I'm going to answer this question of do I need to file form 2553 or file form 8832 with the IRS to change my default tax classification for my business all right so if it's your first time watching my name is Nabi Mirage I am a CPA who helps entrepreneurs save thousands of dollars in taxes by creating content here on social media as well as through a course that I have created you can find out more details about that course on my website which is Nabi muradcpa.com but let's jump into the topic of this video you know which form should you be filing but before I sort of jump you know right into answering that question I want you to understand a few things the first thing I want you to understand is that there are differences between legal entity types and tax classifications okay so the legal entity types I've drawn um on my iPad here the various entity types that you could create we have sole proprietor single member LLC multi-member LLC and Corporation there are some some others but these are the main ones that your small business is typically asking questions about okay there are also tax classifications and these are different than the legal entity type right so the tax classifications here are sole proprietorship S corporation partnership and C corporation all right now the legal entity types those are actually formed at the state level not at the federal level so you typically would go to your State's Secretary of a State website to form any of the entities that you see here across the top of my iPad now as a quick side note I should kind of mention you don't file forms with the state to operate as a sole proprietorship okay so you're not you're not completing any forms to operate that way you could just go out and start performing your business but what you could do is file a DBA which is doing business as or your state might call it a trade name assume name fictitious name there's you know various States call it different things but those documents will say hey State of Florida for example my name is John Doe and instead of doing business as John Doe I want to do business as John's Supreme landscaping for example all right so that's what that form is kind of used for now let me sort of explain what I mean by default tax classification so you know at this point you've gone to your state um and that's where you formed your entity well now how is that entity taxed okay that's what the black arrows kind of signify here on my screen so this is the default tax classification so all you do is if all you do is form these entities at the state level and you fill out no other documents at the federal level This Is How They will be be taxed okay so the sole proprietorship by default is taxes the sole proprietorship and there's no way around that that's the only way it can be taxed the single member LLC is by default taxed as a sole proprietorship so if you form that single member LLC with the state and there's only one member perhaps that's yourself then you're going to be taxed as a sole prop if you form a multi-member LLC that means you went into business with yourself and someone else then by default it will be taxed as a partnership okay and if you filed a corporation at your state level then by default it will be taxed as a C corporation okay but you can change that you can make a tax election all right now if you want to elect to have your entity taxed differently than the default way typically again you're doing that at the federal level meaning you're filing paperwork with the IRS not your state the question is which form is it form 2553 or 8832 okay so you've established that you're not happy with the default tax classification you may want to elect to have your business tax as an S corporation for example if you want to do this then you would be filing form 2553 to have your single member LLC multi-memble multi-member LLC or Corporation taxed as an S corporation okay so that's what the Red Arrows here represent okay the single member LLC has a red arrow saying that hey you can elect to have a tax as an S corporation multi-member LLC can be taxes in s Corporal Corporation as well and the corporation that sort of ink if you will can be taxed as an S corporation as well but what if you don't want to be taxed as an S corporation well then you can complete form 8832 and you can have your single member LLC or multi-member LLC taxed as a C corporation or you can even use form 8832 to have your C Corp operation taxed as a partnership all right that's what the yellow line signify you can see there's a yellow line from single member LLC to Corporation and multi-member LLC to Corporation as well as from Corporation to partnership now I want you to be aware that there are other legal entity types I think I mentioned that at the top of the video that I didn't put on here but because you know these are the most common ones that I get questions about there are also different reasons to use form 8832 for example you may use form 8832 to have your single member LLC which you previously elected to be taxed as an S corporation and you want to revoke that s corporate Corporation and switch it back to being taxed as a sole proprietorship you could do that by completing form 8832 but this video was mainly for new business owners to understand the differences between you know legal entity type tax classification and which form that business this entity could file with the IRS to have their entity text as an S corporation or perhaps even a C corporation or partnership okay now in my opinion I would not be completing form 2553 on your own without first Consulting with the tax professional and I would absolutely not file form 8832 on your own without completely understanding the consequences of what you're doing okay and if you're Consulting with someone about this and the person you're asking questions of can't explain what I just covered here you need to find someone else all right so if you'd like to learn more about the actual tax differences between a sole proprietorship a desk Corporation and a partnership then visit my YouTube channel and go find the video called tax differences explain that's a great video to help you understand the tax impact of these very various tax tax classifications for example in that video I take you through an example of if a business makes a hundred grand in profit why what taxes can it be can it expect to pay if it's taxed as a sole proprietorship an S corporation or a partnership specifically we get into the details of Social Security tax Medicare tax federal income tax and state income tax okay so that's all I wanted to cover today in this video uh with that said I'll see you either in the course again you can check that out at Navi barragecpa.com or I'll see you on the next video here on social media