Lewis, CPA Business Services, LLC


10 Tax Tips for Business Owners

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As you work to maximize your return from your business venture, cutting taxes will help you to achieve your goal.

Contact us for any questions that you may have and/or the brochure "24 Tax Tips for Business Owners" for additional tips that would help you maximize your return and/or assistance in identifying  the best approach for your business.

Carefully consider the legal form of doing business. It is very important to consider the significance of the tax and non-tax consequences of doing business. The basic forms include: sole proprietor, partnership, corporation, or Limited Liability Corporation. 

Seek professional advice before making your decision, and review your the business form you chose periodically to determine if the form is still appropriate.
Consider "Section 1244" stock for a new business. If you choose to operate as a corporation, investigate the advantages of section 1244 stock.

It is important to consider the requirements that must be met, but if your stock qualifies and in the unlikely event that your business fails later, you can deduct up to $100,000 annually against your ordinary income ($50,000 on a single return).

If you choose to operate as a corporation, keep accurate and thorough minutes for the corporation. This is important in the event of an IRS audit.

Minutes should demonstrate any transfer of funds or assets into or out of the corporation, and related party transactions such as officers' salaries, employee and officer benefits, and shareholder dividends.
Elect S Corporation Status. If your sole proprietorship or partnership is making a net profit in excess of a reasonable compensation, electing S corporation status can save you money.

You should take no more than a reasonable compensation for your services to the corporation. If your reasonable compensation is $25,000, for example, there is little point on paying social security tax on more.

If you incorporate and select S status, the salary that you take will be subject to both payroll and income taxes. Any profits above that amount will be subject to income tax but not payroll taxes.
Switch your regular corporation to an S corporation. Investigate the tax advantages of electing S corporation status if your business operates as a regular corporation.

A corporation pays income taxes, and there is an additional tax  on corporate income when it is distributed to shareholders. 

In a S corporation, corporation income is only taxed only once. Individual shareholders report the corporation income on their individual tax returns. You need to compare current corporate and individual tax rates in order to decide whether a C or S corporation is better for your business.
Review your S corporation. If your business is an S corporation, ensure that you have a large enough tax basis to deduct any losses that the company sustains.
Hire your children to work in your business. The wages that you pay them will be deducted by your company and taxable to the family member. 

Payroll taxes need to paid on such wages. However, if your business is a proprietorship or family partnership, they are exempt form paying the payroll taxes for children under 18. Keep in mind that any compensation paid must be reasonable for the services performed.
Do not use the Internal Revenue Service as your banker.  When cash flow is tight, you may be tempted to pay your suppliers first and payroll taxes to the IRS last. 

Pay the IRS first. If you really cannot, contact your local IRS office before they contact you.
Keep good records for all business travel, meal, and entertainment expenses. If you travel for business purposes, the expense is deductible, but business meal and entertainment expenses are only partially deductible.
Time equipment purchases carefully. It may no longer be good strategy to make business equipment purchases late in the year. Under current law you are required to adjust depreciation if you make a large percentage of your equipment purchases in the fourth quarter of the year.

                        Lewis, CPA Business Services, LLC
                                       4914 West Street        
                                     Forest Park, GA 30297              
 Phone: (404) 761- 6501 Fax: (404) 761- 6502

                Lewis CPA Business Services LLC
                                                                    4914 West Street 
                                                              Forest Park, GA 30297

                        Phone: (404) 761- 6501 Fax: (404) 761- 6502