Name: Poojitha Reddy

Assignment: Weekly exercises on compliance in USA

Exercise 1
Introduction:
It is very similar to PAN /TAN in India
A federal tax identification number is another name for EIN.
EIN are issued free of cost by the IRS for the purpose of tax administration.
EIN are 9 digit number issued in the USA to identify business identifies in the
same way that social security numbers are used to identify individual
citizens
When you will need an EIN in case of Sole proprietors
 You are subject to bankruptcy proceedings.
 You incorporate.
 You take in partners and operate as a partnership.
 You purchase or inherit an existing business that you operate as sole
proprietorship.
You will not be required to obtain EIN if any of the following information is
true:
You change the name of your business.
You change your locations/add other locations.
You operate multiple business.
When you will need an EIN in case of Corporations:
You are become a subsidiary of a corporation using the Parents EIN
You change to partnership or a sole proprietorship.
A new corporation is created after a statutory merger.
You will not be required to obtain new EIN if any of the following
statements are true
You are a division of a corporation.
The surviving corporation uses the existing EIN after a corporate merger.
A corporation declares bankruptcy.
The corporation’s name or location changes
A corporation chooses to be taxed as S corporation.
Reorganization of a corporation changes only the identity or place
Conversion at the state level with business structure remaining unpaid.
You will be required to obtain new EIN in case of partnership:
You incorporate.
Your partnership is taken over by one of the partners and is operated as sole
proprietorship.
You end an old partnership and begin a new one.
You will not be required to obtain new EIN in case of partnership if any of
the following statements are true.
The partnership declares bankruptcy.
The partnership name changes.
You change the location of the partnership or add other locations.
50 % or more of the ownership of the partnership changes hands with
twelve-month period
When you will need an EIN in case of LLC:
A new LLC with more than one owner is formed under state law
A new LLC with one owner is formed under state law and chose to be taxed
as a corporation.
A new LLC with one owner is formed under state law and has an excise tax
filing requirement or an employment tax filing requirement
You will not be required to obtain a new EIN if any of the following
statements are true:
You report income tax as branch or division of a corporation or other entity-
and the LLC has no employees or excise tax liability.
An existing partnership converts to an LLC classified as partnership.
The LLC name or location changes
AN LLC that already has an EIN chose to be taxed as a corporation or S
corporation and has no employees or excise tax liability.
A new LLC with one owner is formed under state law does not choose to be
taxed as a corporation or S corporation and has no employees or excise tax
liability.

Answers to the questions

a. Based on the above information no need to change an EIN in case of
partnership name change
b. Based on the above explanation a sole proprietorship needs to obtain
EIN in case of addition of partners
c. Based on the above explanation a company need not get EIN in case of
its bankruptcy
d. EIN needs to be applied based on the above explanation
e. Based on the above information a sole proprietor need not apply for
EIN
f. Based on the above explanation LLC is required to obtain EIN.
Exercise 2
Part 1
Ans 1:
Since the entity has less than 5000 shares the tax need to be paid is $175. As
per authorized shares method.
Ans 2
Step 1: total gross assets /issued shares=Assumed par
=1000000/475000=2.105263
Step 2 : Use that assumed par and multiply with shares having par value
less than assumed par
=1000000*2.105263 =2105263
Step 3: Multiply the shares with par value greater than assumed par by
their respective par value
=250000*10=2500000
Step 4: Add step 2+step 3
=2105263+2500000=4605263
Step 5: Round off step 4 to nearest millions.
=5
Step 6: Multiply step 5 by $400 to get franchise tax.
=5*400 =$2000
Part 2:
Payment of franchise tax in Delaware.
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