Do you understand how your business is organized as an entity and how that affects the amount you pay in taxes? Do you know how the new tax code passed into law at the end of 2017 changed the way your entity is taxed? You may have organized your business structure in one way originally, but are you certain that this is still the most effective structure for your business? Read more
Before we start, I want to define what strategic tax planning actually is. Strategic Tax Planning is a phrase coined by Financial Gravity, but it’s a pretty basic concept. Lowering taxes increases profitability and grows wealth. Unlike other tax-related services and solutions, at Financial Gravity we’re committed to working with you personally to proactively develop a plan to minimize your tax burden and maximize your success.
Our tax strategies aren’t just picked randomly out of a hat. We have partners all over the country who are trained, certified, and experienced tax planning advisors who help you keep capital in your business and pay less tax.
All of our financial advice starts with Taxes. Why? Because the Tax Code is FULL (more than 20,000 pages full) of legal ways you can pay less tax (such as structuring your business as an S-corp instead of a Sole Proprietor or even hiring your kid). The financial industry is broken. Advisors either want to make a transaction or commission while Accountants just want to put numbers into boxes (they aren’t trained to help you with taxes, say what?) Financial Gravity helps small and medium-sized business owners keep more of what they’ve earned — so they can pour money back into the economy and hire more people– by giving them advice based on what the tax code says, not what commission they’ll earn.
You wouldn’t start a business without a business plan, would you? You wouldn’t build a house without a blueprint, would you? You wouldn’t plan a dinner party without a grocery list, would you? Enough said.
At Financial Gravity, we firmly believe that accounting firms are not serving their clients the way they should be. We want to change the financial services industry from being transaction, commission, and product based, to more Tax Code based. By offering Strategic Tax Planning, Financial Gravity will help SMB owners lower their personal income tax liability, and give them numbers that help them run their business
Here are three examples of small business owners who didn’t receive Strategic Tax Planning:
1. You’ve structured your business as Sole Proprietor because your neighbor John told you it’s the easiest way to get started as an entrepreneur (and you are all about preventing headaches). What John didn’t tell you, however, was what would happen if you earned more than $100k as a sole proprietor. Earning more than $100k in gross revenue will increase your risk of being audited. Your headache prevention plan actually turned out to be your biggest nightmare. Not only did you end up paying far more in taxes, but now you have to hire a lawyer to help you sort out this scary audit.
Financial Gravity can help you identify the right filing status for your business.
2. My financial advisor told me to start with an IRA, Individual Retirement Account, and then jump to a 401k after I grew my business. Now that I’m retired, I realize how terrible this advice actually was. Not only have my taxes increased but I’ve had to decrease my lifestyle because my money doesn’t go as far. Not only have my taxes increased but my money is not able to sustain the lifestyle I wanted to live.
Financial Gravity can help you choose a retirement plan (without Third Party Administrators, confiscatory fees, or discrimination rules) that fully supports your unique vision of retirement.
3. My accountant told me to file the $50,000 I spent hosting educational seminars for potential clients and referral partners as a Meals and Entertainment expense. Therefore, I was only able to deduct 50% of the total instead of the entire amount. Little did I know that I could have filed it as a Marketing expense and deducted the full amount. This mistake cost me thousands of dollars.
Financial Gravity can provide you with our Tax Blueprint® (a tax reduction plan that is customized specifically for you and your business). The Tax Blueprint® is your strategic tax plan that when implemented will maximize your personal tax savings and give you numbers to run your business.
I’m sorry to be the bearer of bad news, but becoming an LLC will not magically prevent you from paying Self-Employment taxes. Why? Because an LLC is not a tax filing status.
Before you determine exactly which tax filing status is right for your business, we recommend you read the following Q and A:
Can I file my taxes as an LLC?
No. Though becoming an LLC may be an important step in protecting your business, it is just a legal entity, not a tax filing status.
If I can’t file my taxes as an LLC, what filing status do I use?
Well, it depends on many factors, but the good news is that you have a few options to choose from. You can either file as a Disregarded Entity Partnership, an S-Corporation, or a C-Corporation. If you don’t choose one, however, the default position is Sole Proprietor. But be careful with that one — filing as a Sole Proprietor is probably the most expensive way to file your taxes.
What happens if I have an LLC and I file as a sole proprietor?
Maybe nothing. But if you have an LLC and you file a Schedule C on the Form 1040, you’ll run a greater risk of being audited. In fact, if you make over $100k in gross revenue, you’ll be 5 times more likely to be audited than if you filed as an S-Corp. Filing as an S-Corp may even prevent you from having to pay self-employment taxes.
Sounds great! So I should file as an S-Corp, right?
Not so fast. Because there are pros and cons to every entity, there is no one-size-fits-all answer to this question. Depending on the size of your company, we may even suggest that you file as two different entities.
Ok, now I’m confused.
Don’t worry, you’re not alone. Here’s a good rule of thumb, if your business currently makes over $100k in gross revenue, we recommend you get in touch with a tax professional so they can help you determine which filing status is right for your business.
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