Boy, this is one of those deals that could impact a bunch of folks out there who have set up S Corps or similar business structures as independent contractors. In this quote below I have included a point of contact to follow on this matter who originally brought this front and center. His name is Bob Perry and he specializes in this particular area of the industry. Here is a quote from his article and by all means follow the link if you want to read more and contact him.
TAX ALERT: For Owners of Private Security Companies
September 8th, 2011
By Bob Perry
Congressional lawmakers consider rewriting the U.S. tax code for closely held businesses, including those organized as partnerships, S corporations and limited liability companies.
This could have a dramatic negative effect on the owners of these corporations as they operate the company; and on the net proceeds from an eventual sale of the operating assets.
Hopefully some CPA types can come up and add their two cents on this deal. –Matt
Higher Business Taxes May Follow Treasury’s Definition of Small
By Andrew Zajac
Aug 18, 2011
A new definition of what constitutes a small business being considered by the Treasury Department is raising concerns among some closely held companies that it’s a step toward requiring them to pay corporate taxes.
The proposed definition, included in an Aug. 9 Treasury report, places the upper limit for a small business at $10 million in annual gross income or deductions. Currently, there is no size limit on what constitutes a small business for purposes of tax policy discussions.
The parameters could affect larger, closely held businesses, including those organized as partnerships, S corporations and limited liability companies. Such firms are called flow-through entities because profits flow directly to their owners, who pay personal income tax without first being subject to corporate tax. Large investment firms, including D.E. Shaw LP of New York and Renaissance Technologies Corp. of East Setauket, New York, and major law firms such as Los Angeles- based Latham & Watkins LLP are organized as flow-through companies.