How tax efficient is your business structure?

With so many business structure options, it can be quite overwhelming. Most people are somewhat familiar with LLC, Partnership, and Corporations. However, even these structures can provide you with major tax advantages or result in your business owing more taxes than necessary.

Limited Liability Companies are among the most well known organizations; they are structured to provide your business with limited liability in an incident that could otherwise expose your personal assets to risk. LLC organizations establish a separation between your business and yourself. This is the most beneficial aspect of organizing as a LLC. Other advantages include:

  1. Easily managed
  2. Flexibility with finance and distributions
  3. Choice of tax classification
  4. Easily organized within your state

Once you decide you want to organize your business as a LLC, you can then choose how your want to classify for tax purposes. The default tax classification for a LLC is either a sole proprietorship (for single-member LLC) or partnership (for multi-member LLC). With both of these options, the income is passed through to the owners on their personal tax return. A single-member LLC will report their business income on schedule C of their personal tax return. A multi-member LLC (partnership) will file a separate 1065 return and distribute a K-1 to each member. For a small business start-up, both of these tax classifications will provide ample tax advantages and flexibility.

Other possible tax classifications for a LLC include S Corporation and C Corporation. These classifications are acceptable for businesses with employees and/or those who need additional tax savings.

Stay tuned for more information on S and C Corporations.

 

What should you look for when hiring a CPA for your business?

  1. Someone who is a PROFESSIONAL. By professional, I mean, someone who has the credentials (education, licenses, experience, etc.) to get the job done correctly and completely.
  2. Someone who is PERSONABLE. So we’ve all heard the jokes about accountants being odd, standoffish, awkward, and reserved. While that is true for some people, it is most definitely not the norm. Look for someone who is relatable; someone who can communicate easily, who you can understand, and someone you feel completely comfortable talking to.
  3. Someone who works for YOU. As a CPA, it is my job and responsibility to put your needs at the forefront. Contrary to popular belief, CPAs do not work for the IRS. We work for YOU. Our duty is to provide you with the means to save the most money, make you profitable, and make sure you are aware of applicable taxes, codes, and laws. We are not IRS auditors or tax collectors. If you feel your CPA isn’t doing everything in their reach to save you money, find another one! Simple as that.
  4. Last but definitely not least, someone who is AVAILABLE! I hear this all the time, “I could never get a hold of so-and-so accountant.” As a business owner, you should look for a CPA who is available to return your call, message, etc., within 12-24 hours. Your business should be as important as our business. Simply put, your business, is our business. Find someone who can be there for you when you need them. No matter how much they meet the other 3 criteria, if they aren’t available, it doesn’t even matter.