Business Advisory
Business Advisory Services
Everything you need to help you launch your new business entity from business entity selection to multiple-entity business structures.
Posted Tuesday, December 3, 2024
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For your business tax return preparation, our fee starts at $1,500 (with most being $1,500 to $1,800), however we do have discounted fees for certain situations such as rental real estate holding companies. We think of our fees as easy, medium, and hard (we’re from Colorado, so we think in green circles, blue squares and black diamonds). This encompasses partnership tax returns (Form 1065) and corporation tax returns (Form 1120 and 1120S) including the Section 199A calculation and deduction.
Beyond complexity and tax footprints, your fee also depends largely on the quality of your accounting records, how organized you are, the past accuracy of your balance sheet, including how much clean up is required. We cannot repeat or continue with ghosts of poor accounting past.
You might also benefit from our Tax Patrol Service, which is tax preparation + planning and periodic chats throughout the year. Check it out!
And yes, our business tax return preparation fee could increase depending on your specific world. If so, you’ll be in a special group — the 10% group of WCG business owners. In other words, 90% of our business entity tax returns are close to the fees above. We’ll talk more about this in a bit, but first, let’s take a step back.
Partnership Tax Preparation (Form 1065)
As alluded to earlier, if you have more than one member (owner) in your limited liability company, then you are now a fancy multi-member LLC. Yes, this includes your spouse unless you are in a community property state (WA, ID, CA, NV, AZ, TX, LA and WI). Partnership tax returns are seemingly either very straightforward or quite complex. Sure, there are some middle of the road returns, but in our experience this is a good generalization.
Straightforward
- You and your brother-in-law own a rental. Straightforward.
- You and your spouse operate a dog wash. Straightforward.
Complex
- You and your brother-in-law own several rentals in various states — getting more complex.
- You have a multi-entity arrangement where the partnership pays out a fee for service to other S corporations such as financial advisors, insurance agents, medical groups, etc. Not super complex, but time-consuming.
- You and your spouse operate as an Amazon retailer with sales in all 50 states plus DC — revenue apportionment, lovely!
- You bring in a partner. You kick out a partner. You do both. Capital accounts need adjustments, short-year calculations and all kinds of other allocation issues. Fun!
- You have 10 other partners with various arrangements, revenue splits, member interests, allocations and other craziness. For example, member 1 receives a guaranteed payment of $100,000 before the other nine members, provided that the net operating income is over $500,000, and that working capital at the end of the year before required distributions for tax payments and after forecasted debt service is $350,000. Huh?! Oh boy, here we go — buckle up!
Where does this leave us? We have attempted to articulate business entity tax return complexity in the form of dollars. In terms of Colorado, we would say green squares, blue circles and black diamonds.
Operating Partnership Fee Structure
An operating partnership is contrasted with a holding company partnership, and includes a business that provides services or sells goods. A holding company partnership is typically a business that owns real estate, either single-family homes or commercial. In commercial settings, commonly the holding company is leasing the property to the operating company. See Real Estate Holding Company below.
| Operating Base Partnership Fee | $1,500 to $1,800 |
| More Than Two Partners / Members | $150 to $200 for each additional partner (discounts available) |
| More Than One Tax Jurisdiction (state, county, city), Backup Withholdings | $150 to $250 for each additional tax jurisdiction |
| Has Employees | $250 to $500 depending on accounting records |
| Changes in Ownership, Disposition | $250 to $500 depending on level of craziness |
| Foreign Interests, Connections | $500 to $750 depending on the required forms |
| Nutty Operating Agreement Calcs | Depends, but example #4 above would be about $300 to $500 |
Don’t freak out and snap your pencil trying to add all this up. This is only a guideline, and frankly we’re aiming high here. For example, an operating partnership with 5 partners conducting business in 3 states is looking at $1,950 to $2,200ish using the table above. We might be able to prepare the tax returns for less; just like snowflakes, each business is unique.
You might be asking what the heck is a tax jurisdiction. Each state, county, city, and even school district might be a separate tax jurisdiction and require a separate tax return prepared and filed alongside the federal tax return.
Ultimate Tax Preparation Fee
We have attempted to take time expectations and assign a numeric fee structure. This is an impossible task. Please keep in mind several factors. These include partnership account adjustments, adding or removing partners, and manual capital account reconciliations.
Additionally, rebuilding partner basis information, asset dispositions (such as the sale of a rental or equipment), and backup withholdings calculations are important. Other considerations are entity shutdowns, odd-looking balance sheet entries, and various moving parts. Let’s not forget the equity partner versus economic partner arrangements and the mental gymnastics that might ensue from those types of deals.
The additional fees for each partner are very generic, and we leave a lot of room for discounts. Once you start hitting 5 to 6 partners, the incremental time for each additional partner is lower and lower. It’s like getting tile work at your house — the first tile labor involves unloading, preparation, mixing of the mortar, etc. and is very expensive. The labor for the next tile is way less.
The best way to solve the “what’s my fee going to be?” conundrum is to provide last year’s tax returns for review and quotation. Again, our fees above are meant to reflect generalities.
Real Estate Holding Company Tax Preparation
As mentioned earlier, a real estate holding company partnership is generally a business that owns rental properties and usually has fewer transactions, and therefore is more straightforward (i.e, less time-consuming). There are lots of reasons to do this, as we outline below.
| Rental Property Holding Company Base Fee | $1,000 to $1,200 |
| More Than Two Partners / Members | $150 to $200 for each additional partner (discounts available) |
| More Than Two Properties | $200 to $250 for each additional property |
| Rental Property Setups | $150 to $300 depending on complexity, one-time fee |
| Special Allocations | Depends on the complexity, most are $300 to $500 |
A partnership has an Operating Agreement which formalizes the relationship. Sure, you can own something with your brother-in-law as joint tenants or tenants in common, but a formal entity is good protection for everyone (and also serves a smooth way to transfer ownership as necessary). As a quick sidebar, you might want to create a partnership intentionally between you and your spouse (or some close relative) to reduce your risk. Quickie recap:
- Lower audit rates
- Mechanically support your basis and ability to deduct losses
- Activity is separate from your 1040 tax return, which provides more shielding
Read more about rental property partnerships with the button below.
Tax Planning
WCG offers a lot more than just a tax return. Tax returns are boring. Most CPAs are boring and aren’t forward-thinkers.
Tax planning strategies are commonly addressed in December, as small business owners and other taxpayers start to freak out about bringing in the New Year. However, tax planning is an ongoing and fluid dynamic, and it should be performed methodically throughout the year. The uneasiness of not knowing your tax obligations is avoidable! Got a big fat raise? Booyah! Just sold a rental? Your spouse is going back to work?
Sure, we can slam things together on December 31, but that is operating in crisis mode. Rather, operating in planning mode throughout the year allows for better decisions and better tax savings. Tax planning is a valuable service that most tax professionals don’t readily offer… but WCG does! It is included in our Business Advisory and Tax Patrol Services, including standalone Tax Plans. Click the buttons below for more information.
Let’s do some tax planning and see if you should spring for the new car, or stick with the lightly used one.
Adding Your Spouse to Payroll
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