FEBUARY_2012.doc   JANUARY_2012.DOC DECEMBER_2011.doc   A critical business question: Should you incorporate or not? One of the first decisions you face as a new business owner is whether or not to incorporate the business. The biggest advantage of incorporating is limitation of your liability. Your responsibility for debts and other liabilities incurred by a corporation is generally limited to the assets of the business. Your personal assets are not usually at risk, although there can be exceptions to this general rule. The trade-off is that there is a cost to incorporate and, in some cases, tax consequences.      Should you incorporate?   You might not need to incorporate. Depending on the size and type of your business, liability may not be an issue or can be covered by insurance. If so, you could join millions of other business owners and operate as an unincorporated sole proprietor. If you do decide to incorporate, you’ll face a choice of corporate forms. All offer limitation of your liability, but there are differences in tax and other issues.     ·   C corporation   The traditional form of corporation is the C corporation. C corporations have the most flexibility in structuring ownership and benefits, and most large companies operate in this form. The biggest drawback is double taxation. First the corporation pays tax on its profits; then the profits are taxed again as they’re paid to individual shareholders as dividends.     ·   S corporation and LLCs   Two other forms of corporation avoid this double taxation: S corporations and limited liability companies (LLCs). Both of these are called “pass-through” entities because there’s no taxation at the corporate level. Instead, profits or losses are passed through to the shareholders and reported on their individual tax returns. S corporations have some ownership limitations. There can only be one class of stock and there can’t be more than 100 shareholders, none of whom can be foreigners. State registered LLCs have become a popular choice for many businesses. They offer more flexible ownership than S corporations and certain tax advantages. Whether you’re already in business or just starting out, choosing the right form of business is important. Even established businesses change from one form to another during their lifetime. Some companies use more than one type of corporation – for example, an LLC to hold the business’s real estate and an S corporation for other operations. Consult our office and your attorney for guidance in selecting the form that is best for your business.       This newsletter provides business, financial, and tax information to clients and friends of our firm. This general information should not be acted upon without first determining its application to your specific situation. For further details on any article, please contact us. Archived Monthly News Updates: JANUARY_2011.DOC FEBRUARY_NEWSLETTER_2011.DOC MARCH_2011.doc APRIL_2011.doc MAY_2011.doc  JUNE_2011.doc SEPTEMBER_2011.doc OCTOBER_2011.doc NOVEMBER_2011.doc

Traditional to Roth IRA Conversions Four years ago, the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) relaxed some restrictive rules preventing many taxpayers from converting a traditional IRA to a Roth IRA, but this favorable change was not effective until 2010.   Business Cell Phone Restrictions Removed Effective for tax years beginning after 2009, cell phones and similar telecommunications devices used for business are no longer subject to the ultra-strict recordkeeping requirements that formerly applied.   Preserving Tax Deductions for Business Travel If a taxpayer's trip is undertaken solely for business reasons, reasonable and necessary travel expenses, including travel fares, lodging, meals, and incidental expenses in getting to and from the destination are generally deductible on federal tax returns (subject to the 50% disallowance for meals and entertainment).