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One Class of Stock Back to Top

An S corporation can generally only have one class of stock. Differences in the rights of shares permitted are very limited, e.g., some shares can be voting and others not. However, the return, distributions, and general economic rights of every share must be identical. Absent liberalization of these rules, an LLC that is taxed as a partnership, has substantial advantages over an S corporation in that the Members are permitted great latitude in allocating income, profits, deductions, and so forth. The allocations must, however, meet the requirement of having Substantial Economic Effect. Ask your estate planner about QSST and ESBT.

Operating Agreement Back to Top

This is the written contract between all the owners (Members) and generally also those in charge of operating the LLC (Managers). An LLC Operating Agreement is analogous to a corporation's shareholders agreement and a partnership's partnership agreement. This agreement should address in detail the rights and obligations of members. It should contain buyout provisions in the event of the death of a member. If the LLC is an active business, the issue of disability should be addressed. These tax issues should be addressed

Option Back to Top

An option is a right that you may choose to exercise, or not. For example, you may place a down payment on a parcel of real estate for an option or right to purchase it for at a specified price. If you decide not to exercise the option the landowner will generally keep your deposit. The purpose of an option is to give you a period of time to assess whether or not you want to complete the purchase. If you are the seller, an option could be a good way to sell a property in a softer market.

Option can also refer to a right to purchase stock.

Ordinary and Necessary Expense Back to Top

For payments to be deductible they must be ordinary and necessary expenses of your trade or business. Extravagant or personal expenses will not be deductible.

Ordinary Income Back to Top

Income or gain from selling property that is not a capital asset. See Capital Asset. Ordinary income is taxed at rates of up to 39.6 percent, which is less favorable than capital gains rates from 10 to a maximum 28 percent. There is an advantage for many taxpayers to realize capital gains rather than ordinary income.

Organ Donations Back to Top

You can donate organs, tissues or even your entire body. This can be done by completing an organ donor card. If you wish to donate your entire body to medical research you should make advanced arrangement with the institution to which you will donate your body. Whatever decision you make, don't make it lightly (especially not to donate) as you can save one or many lives with such a generous and gracious act. Also, don't assume that your religion necessarily prohibits organ donations. The rules, especially if your actions are limited to transplants to save a life, may be viewed favorably, not prohibited. Whatever decisions you make, they should be clearly noted in your living will.

Organizational Expenses Back to Top

Costs incurred to set up a business, partnership, or corporation can't be deducted as paid. Instead, these costs can be written off (amortized) over 60 months beginning with the date your business, partnership, or corporation begins to conduct an active business.