Entrepreneur: Tax Perks and Benefits

The Good, Bad, and Ugly

Jeff Wilson II CPA, CGMA, AFC

Financial Planner

Entrepreneur

“Its what You don’t know, that you don’t know that gets you” Terese Kalloo CPA

A person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.

Course Objective

• Discuss the Purpose of a small business

• Identify the various tax structures

• Discuss their Pros and Cons of tax structure selection

• Discuss how to maintain your business to keep “Good Standing”

• Identify tax deductions that are allowable

• Dispel any myths about taxes and myths

What’s the Purpose

• What your purpose for starting a business

– Getting rid of your boss

– Additional tax write-offs from your W-2 income

– Life after retirement

– Good business opportunity

– Retirement planning

• Start your business with the End in Mind

– Do you plan on selling the business

– Will the business we passed down in the family

– Do you own a job or a business

Sole Proprietor

• Pensions Plan (KEOGH

• Dissolves upon death of owner

• Take losses against other active Income W-2

General Partnership

• Pension Plans (Keogh)

• Dissolves upon death of any partner

• Take losses against other active W-2 Income

Business Entity SelectionThing to Consider : Legal Liability, Taxes, Retirement Planning

No Need for a Liability Protection

Limited Liability Company

• Organized with the State

• Retirement Plan

• Personal Assets are generally protected from business liability

• Retirement Plan

• Taxed at 15.3% + Individual Income Tax Rate(20-25%)

Limited Partnership

• Organized with the State

• Does not dissolve upon death of any partner

• Take losses against other active W-2 Income

• Limited Partner cannot actively participate (Silent Partners)

• Taxed at 15.3% + Individual Income Tax Rate(20-25%)

S-Corporation

• 100 Shareholders or less

• Only U.S. citizens allowed to be owners

• Retirement Plans

• Not subject to 15.3% Self Employment tax (How long will this last??)

Business Entity SelectionThings to Consider : Legal Liability, Taxes, Retirement Planning

Need Legal Protection

&

Losses are Expected in the Start-up Phase

C Corporation

• Organized with the State

• Retirement Plan

• Personal Assets are generally protected from business liability

• Retirement Plan

• Fringe benefits plan (BIG DEAL)

Personal Service Corporation

• Separate tax entity using a flat rate of 35%

• Fringe benefits

• Retirement Plan

Business Entity SelectionThings to Consider : Legal Liability, Taxes, Retirement Planning

Need Legal Protection

&

Expected to be Profitable Start-up Phase

Comparison of Tax Rates

Corporate Tax Rates Individual Tax Rates

• 3.8% Net Investment tax

($200K Single or $250,000 MSJ)

• 0.9 tax of 0.9% on wages and self-

employment income in excess of

$200,000 ($250,000 for married joint;

$125,000 married separate).* Individual Tax Rates can get to be over 40% *

“Good Standing”

• File you Annual Tax Return on time

• Fie your Personal Property Return timely

(MD)

• Get an accounting system (QuickBooks,

Freshbooks, etc).

• Maintain records and receipts for 7 years

• Have a Accountant

• Have a Lawyer

• Have a Prayer

What tax deductions are allowable

Expense that can be “REASONABLY” associated with the

operation of a Business for a profit motive.

Business vs. Hobbies

Fictional Tales and Tax Myths• Filing taxes is voluntary (Wesley Snipes Tax Case)

• The first 5 years of business you don’t have to pay taxes

• Home office deductions = instant audit

• Home office deductions cannot be the whole house

• My accountant is liable for any mistakes

• If you don’t make a profit you don’t’ have to report you business

• “MY Tax guy gets me back a lot of money, he knows the tricks”

• If I don’t receive a 1099, I am not responsible for reporting income

Questions

Jeff Wilson II, CPA, CGMA, CFE, AFC

President

The WII Group, LLC

jwilson@wiicpas.com

www.wiicpas.com

(240)-244-9813