How you do business is how you pay taxes! In this article, I share my favorite tax strategies for growing businesses.
How do entrepreneurs get ahead by using tax strategies to grow their business?
The story of Cal the plumber perfectly illustrates how this can be done…
Cal owns his own business. That’s what he knows. That’s what he learned, that’s what he does everyday and he does it well. Cal doesn’t know tax law. He doesn’t know where to invest his money for the future.
Cal doesn’t know whether he is paying too much in tax or too little in tax. He relies on his tax professional to give him the answers to these questions.
He hopes his tax professional has been trained correctly. The problem is that there are many tax professionals that don’t understand the deep insights of the tax laws as a tax attorney.
I am asked what are the advantages of my being a tax attorney?
I explain that my knowledge, experience and training is the highest that any tax professional can achieve. I am trained in law and I am trained in tax law.
This means that if and when you ever are faced explaining what you did before the IRS, I am able to give you advice on how the law will look favorably or unfavorably on your situation.
The advantage is the training in the understanding of how the law exists, how it is interpreted, how it applies and how it can be applied either as a shield or a sword. It doesn’t matter whether you think what you are doing is right when push comes to shove, it only matters whether you are in compliance with the law or not.
When it comes to the type of entity that is the best structure for a business, a proper understanding of the laws and tax laws are essential.
This tax strategy can change your wealth- Use of an S corporation instead of an LLC or sole proprietorship.
Most business owners start their business as a sole proprietorship.
One of the reasons for this is they don’t have much money nor are they making much. When your income is low and you have a very little risk this kind of structure can be perfectly fine.
As your income grows, though, and particularly when you take on more liability to your customers and clients, moving to a different form of doing business can make a huge difference in how you are protected and how your efforts can affect your net worth.
A C.P.A. stands for certified public accountant.
This has nothing to do with law, tax law or the type of business structure that is most suitable for a business. However, because some C.P.A’s prepare tax returns, the client looks to their C.P.A. for advice on the type and structure of their business.
Although the C.P.A. is not a lawyer, many times a C.P.A. will advise a client to structure their business as a Limited Liability Company (LLC). The can be a BIG mistake.
When business owners do business as an LLC, they are taxed just like sole proprietorships.
That means they are going to pay two taxes. One, the payroll tax on their net profit from their business and two, income taxes. If you like being separated from your money this is a good way for it to happen.
As a 35-year tax attorney who has advised thousands of business owners and their families, I generally recommend that an LLC should never be used for business.
LLC’s are fantastic when you own real estate.
For business, I almost invariably recommend the business be structured as S corporation. Using an S Corporation, there is a tax trick where some of the profit avoids the 15% payroll tax.
This can end up being thousands to tens of thousands of dollars. That’s a lot of money every year just from how you operate your business.
Identifying the right entity for you takes the right knowledge and experience. Business Growth By Design through its legal arm, Legacy Legal, can give you the right information and put you on the right path to growing a wealthier business.
Do You Have the Right Structure for Your Business?
Take action by creating a long-range plan for your business that will help you keep more money in your pocket rather than the government’s.
Set up a meeting with one of our tax professionals and discuss ways to position your company for success by giving us a call at (760) 579-0079.
Or you can contact us >>HERE<<
Unless your situation is very straightforward we are well positioned to find ways that will more than compensate you for the time and cost you spend with us.