Investment and Financial Services

The four best performing stocks on the Zacks #1 Rank List last week were: Diamond Foods, Inc. (DMND), SureWest Communications (SURW), Sun Healthcare Group, Inc. (SUNH) and Hanger Orthopedic Group, Inc. (HGR).

Diamond Foods, Inc. (DMND) was the top-performing Zacks #1 Rank last week as shares gained 14.6% during a wild period for the market. The company, which specializes in nuts and snack products under the brands Diamond®, Emerald® and Pop Secret®, was highlighted as an Aggressive Growth Stock of the Day at Zacks.com on Oct 1. Earnings estimates for this fiscal year, ending July 2009, are approximately 1.6% higher than 2 months ago.

In late September, DMND announced fiscal fourth-quarter results, including earnings per share of 16 cents that significantly improved upon the year-earlier performance. The result also beat Wall Street expectations by almost 23.1%. Net sales moved higher by 1% to $113.1 million. Earlier in the month, the company had acquired the Pop Secret microwave popcorn brand from General Mills. For fiscal 2009, DMND expects EPS between $1.20 and $1.27, excluding an early debt termination expense, and net sales between $585 million and $615 million. At the moment, analysts are expecting $1.25 for the fiscal year.

SureWest Communications (SURW), a leading integrated communications provider, gained a little more than 8.5% for the week ended Oct 3, which was enough to make the Zacks #1 Rank Top Performers List. Earnings estimates for this year and next are up sharply from 2 months ago.

In its second-quarter report from August, SURW announced better-than-expected earnings per share of 12 cents. Consolidated revenue was up 36%. The company stated that the quarter’s results showed that its decision to focus on Broadband and advanced network services was the right move. SURW expects continued success from this strategy moving forward.

Sun Healthcare Group, Inc. (SUNH) updated is 2008 full-year guidance last week and now expects between 91 cents and 94 cents. Previously, the company expected 85 cents to 90 cents. According to the company, the new guidance reflects management’s current expectations, the classification of 5 centers as discontinued and favorable interest rates on its variable rate debt.

The senior health care services company made the Zacks #1 Rank Top Performers List last week with a gain of 5.1%. Earnings estimates for this year are up 3.4% from 2 months ago. Furthermore, analysts expect next year’s profit to improve approximately 23% from this year.

Hanger Orthopedic Group, Inc. (HGR) will report its third-quarter results on Oct 27. In its second quarter, the company reported earnings per share of 25 cents, which beat the consensus by 25%. The result also improved upon last year’s result of 17 cents. Net sales were up 13% to $181.2 million. The company has a solid record of meeting or surpassing Wall Street’s quarterly earnings expectations.

HGR, which provides orthotic and prosthetic patient care services, was able to make the top performers list during a very difficult week by simply moving slightly higher rather than lower. Over the past 3 months, earnings estimates for this year are up 6.5%. Expectations for next year are also up in that timeframe, while analysts continue to expect profit to improve from this year.

James Giaquinto is an Editor at Zacks Investment Research for more information please visit

There are several advantages to establishing a limited liability company and many of these compensations revolve around the tax advantages. A limited liability company if often sought as a third alternative to forming a corporation or a partnership. Many corporations are formed because they offer attractive limits on the personal liability that the business may suffer due to debts or liabilities. Partnerships don’t offer the same kind of protection, but do provide better tax advantages.

A limited liability company works to combine both these features, providing protection against personal liability while also establishing solid tax advantages. In addition to these selling points, a limited liability company is also often preferable to either incorporation or the formation of a partnership because they provide more flexibility than corporations and also because the legalities involved in running tend to be less formal. It is this lack of formality that leads to the tax advantages inherent in a limited liability company.

When it comes to federal taxation laws, a limited liability company has much more flexibility for choosing particular tax advantages. The default choice when there is more than one owner is for the LLC to be treated like a partnership and file the same form, Form 1065. But a multiple-owner LLC can also choose to be treated as either a C corporation or an S corporation. A single-owner limited liability company can choose to be treated for tax purposes as either a sole proprietorship—which is the default choice made by the IRS—or as either a C corporation or an S corporation.

The primary tax advantages in organizing a business entity as a limited liability company is the avoidance of double taxation. In traditional corporate structure, a company’s income is initially taxed and after the profits are divided in the form of dividends, they are subject to taxes again. But a limited liability company’s income bypasses the initial taxation and instead each member of the LLC is taxed based on individual allocations. One of the other tax advantages of a limited liability company is that dividends are not subject to taxation.

Of course, along with tax advantages come disadvantages. After all, if limited liability companies were perfect, there wouldn’t be any other kind of companies. Some states have chosen to impose franchise taxes on LLCs. Of they may require certain annual fees in order to allow you to operate within that state.

The legal ramifications of choosing to become a C corporation or S corporation or simply a sole proprietorship are dense and complex and certainly shouldn’t be made after reading an article on the internet, even articles that provide much more information that this article. Tax advantages of limited liability companies are certainly a selling point—along with the protection they offer from liability—but before making any decision; it is advisable to consult an experienced attorney. One thing to keep in mind about a limited liability company beyond the tax advantages is that they are a fairly recent innovation and therefore legal precedent is in the process of being set right now. In fact, should you face legal action, your case may be the one that sets the precedent.

Matt Garrett
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By Alexander Glaser

Operating a corporation form of business is much more advantageous than to the other forms like sole proprietorships. The tax and legal system provides several benefits and relative immunity specifically to the corporations and their owners.

Among many of the major and minor tax advantages, you will find the following as most relevant and useful for your own business corporation.

Owners at Ease with Business Liabilities: A Legal Protection

The biggest advantage of operating a corporation is a legal shield provided to its owners from their business related liabilities. Majority of the corporation owners prefer this legal protection. A corporation has its own locus standee in terms of both legal as well as the taxation. Separation of legal and tax entities enables a corporation for incurring debt and liabilities related transactions as an independent business entity. As a result, the owner remains free from the liabilities and enjoys relative immunity from the business debt.

Such type of business arrangement becomes very crucial if it is a risky venture involving various types of legal and tax complications. It is also equally pertinent if the owner of the corporation is wealthy as well.

However, the protection under law is not limitless and becomes open to all such applications when the lender makes it mandatory to possess a guarantee of the corporate stakeholders against any corporate debts.

Tax Deductions with Fringe Benefits

Tax advantages related to the fringe benefits are a plenty for a corporation. Various types of tax deductions can be availed favouring the business, employees, and family members of the owner. The benefits are equal even if you are the sole stakeholder in the business.

Miscellaneous tax advantages available to all include health insurance, life insurance, travel insurance, entertainment expenses, and several others. There are specific deduction slabs that could be advantageous for everyone in your business. For instance, business corporations have been allowed to deduct 100% medical insurance premium paid.

Another intelligent move would be to remove the self-employment tax cap and by reducing the investment in “Social Security Tax” along with the “Medicare Tax.” Individual’s tax liability thus also is reduced this way and you become an employee of your own corporation.

Deriving Tax Deduction Benefits with Business Losses

Business losses incurred, if any, also come under the purview of tax deduction benefits and give you a safe hand. There are no upper ceiling limits for incurring business, capital, and operating losses. Meaning thereby, you can freely carry forward or carry back your losses to the previous as well as the subsequent tax-years.

On the contrary, the business entities that are not incorporated legally have to face far stricter provisions and do not enjoy limitless transitions of business and corporate losses. For instance, in case of a sole proprietorship business entity the owner is not permitted to claim a tax deduction for a business loss incurred for more than $3,000 if there are no offsetting capital gains.

Sharing and Shifting Income for Tax Benefits

Among other benefits of incorporating, the ‘Income Sharing’ is an important factor. In simplest terms, it is an act of dividing the income among the business, the corporation, and its shareholders. An intelligent tax consultant would design this division in such a way that the overall tax liability automatically comes down substantially.

For an individual who is running a small-scale business but its stakeholders are falling into the higher tax brackets this type of income classification is extremely helpful.

In case of the corporations having less than 100 employees on their payrolls would not attract the corporate tax rates implications. Here the business profits are generally paid out already in forms of tax-deductible salaries and other fringe benefits to the employees.

However, no business would prefer to pay out its complete business profit in such a way. It is never a better option for a small corporation. Substantial part of the profit proceeds would be required for further expansion of operations and increasing the product line. An increased investment may also be required to invest in the advertising. For all such future investment plans, the profits retained would attract a tax at an initial rate of 15% only.

This way a business corporation can easily retain its earnings with itself and that too without transferring any tax liability to its stakeholders. Because of this very tax advantage, we are observing an exponential growth with upcoming new corporations.

Taking Benefits of Dividends Received Exclusion

If you are lucky, enough to run a cash-rich corporation and your shareholders are not inclined to withdraw any cash assets you can surely take an advantage of “dividends received “exclusion. It is extremely beneficial for your business.

The tax burden is relaxed almost by more than half even. For example, an individual receiving corporate stock dividend otherwise would have to pay tax for all of its value would be required to pay even less than half of its value if the corporation is falling under the “dividends received” exclusion category.

Tax Saving Strategy with Assets

Substantial tax savings can be availed for movable and immovable assets acquired. A corporation may acquire a leasing real estate, an automobile, and many other properties and assets. As a business owner, your own assets would also be covered under corporation umbrella and you can avail of the tax savings.

This tax saving strategy is almost similar in nature with the income shifting. However, it is not free from in-depth scanning and scrutiny by the tax authorities. You must be very careful while adapting to this measure and any action taken therein must be in consultation with an experienced tax consultant or attorney. DIY Finances: Financial Responsibility.

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