In addition to the tax consequences of the form in which an entity chooses to do business, the tax consequences of how the entity chooses to manage business operations on a day-to-basis and record them for accounting purposes can also have significant implications for the success of a business.
Organizers must make key decisions on how they will operate the entity when the business is formed. Key decisions include the inventory cost-flow assumption, the accounting method to be used, the fiscal year end, and the method for calculating and claiming depreciation of assets. Businesses must also consider how they will structure multijurisdictional operations, and the choice of where to do business can result in tax savings or a substantial increase in tax cost. In Milestone Two, which is due in Module Six, you will make recommendations to the clients in the final project scenario regarding these key operational decisions.
Read the Milestone Two scenario excerpt below—you can also access the full final project scenario—and then create a professional memorandum that provides recommendations for key operating decisions.
For each recommendation, be sure to give a detailed explanation of the associated tax consequences.
Specifically, the following critical elements must be addressed:
Create a memorandum to stakeholders with an executive summary using logical reasoning based on your tax research to explain why the client should adopt your recommendations for structuring business operations.
Make a recommendation for the appropriate inventory cost flow assumption for a merchandising business.
Make a recommendation for the appropriate overall business accounting method (cash, accrual, hybrid).
Make a recommendation for the appropriate depreciation method and asset lives, including consideration of Section 179.
Make a recommendation for the appropriate fiscal year end for your recommended business entity.
Explain the tax implications related to multijurisdictional operations of a business, including interstate and international considerations.
The second meeting is about two weeks after the first meeting. The Tai-Ga owners have completed all the legal steps necessary to set up the new business using the entity form that you recommended during the first meeting. In the second meeting, you will explain the tax elections and other accounting matters that must be considered prior to commencing operations. You will discuss the options available to the Organizers and make specific recommendations.
Rubric Guidelines for Submission:
Your paper should be a 3- to 5-page Microsoft Word document (excluding the cover page and reference pages), with double spacing, 12-point Times New Roman font, one-inch margins, and at least three sources cited in APA format.