Scenario
Juwan Smith and three friends from law school recently formed Smith & Associates as an LLP (Limited Liability Partnership). Income from the partnership will be split equally among the partners. The partnership will generate their income primarily from representing clients in bankruptcy and foreclosure matters. While some attorney friends have suggested that partners’ earnings will be self-employment income, other attorneys know that their local bar association meetings claim W2 or guaranteed income. After examining relevant authority, explain how you would advise Smith & Associates on this matter.
This activity will support your ability to provide client advice in your Project Two milestone and in Project Two.
Directions
Considering the scenario above, write a 1- to 2-page client letter evaluating and advising this company on their tax planning strategy.
Specifically, you must address the following rubric criteria:
- Explain the ethical principles influencing the way this entity can choose to report their income. Consider the following in your response:
- Reporting the partners’ earnings
- Partner income and its impacts self-employment or partnership
- Additional employees’ payment
- Ethics withing reporting or not reporting earnings as self-employment
- Evaluate two different tax planning strategies. Include the following in your response:
- Expense in each strategy
- Taxable income for each strategy
- Discuss entity alternatives for this company. Include the following in your response:
- Entity organization that would result in a total reduction in tax liability
- Partnerships within the entity organization
What to Submit
Submit your client letter as a 1- to 2-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins. Sources should be cited according to APA style.
Module Seven Activity Rubric
| Criteria | Exemplary (100%) | Proficient (90%) | Needs Improvement (70%) | Not Evident (0%) | Value |
|---|---|---|---|---|---|
| Ethical Principles | Exceeds proficiency in an exceptionally clear, insightful, or sophisticated manner | Explains the ethical principles influencing the way this entity can choose to report their income | Shows progress toward proficiency, but with errors or omissions; areas for improvement may include adding details related to the ethical principles influencing the way this entity can choose to report their income | Does not attempt criterion | 30 |
| Tax Planning Strategies | Exceeds proficiency in an exceptionally clear, insightful, or sophisticated manner | Evaluates two different tax planning strategies | Shows progress toward proficiency, but with errors or omissions; areas for improvement may include adding details related to the two tax planning strategies | Does not attempt criterion | 30 |
| Entity Alternatives | Exceeds proficiency in an exceptionally clear, insightful, or sophisticated manner | Discusses entity alternatives for this company | Shows progress toward proficiency, but with errors or omissions; areas for improvement may include adding details related to entity alternatives for this company | Does not attempt criterion | 30 |
| Clear Communication | Exceeds proficiency with an intentional use of language that promotes a thorough understanding | Consistently and effectively communicates in an organized way to a specific audience | Shows progress towards proficiency, but communication is inconsistent or ineffective in a way that negatively impacts understanding | Shows no evidence of consistent, effective, or organized communication | 5 |
| Citations and Attributions | Uses citations for ideas requiring attribution, with few or no minor errors | Uses citations for ideas requiring attribution, with consistent minor errors | Uses citations for ideas requiring attribution, with major errors | Does not use citations for ideas requiring attribution | 5 |
| Total: | 100% |