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Entrepreneurship and taxation

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Jeff Wilson II, CPA/PFS, CFE, CGMA
Jeff Wilson II, CPA/PFS, CFE, CGMA

This document discusses various tax considerations for small business owners. It begins by outlining different business structures like sole proprietorships, general partnerships, LLCs, S-corps and C-corps. It notes factors to consider like legal liability, taxes and retirement planning when choosing a structure. The document then discusses maintaining your business in "good standing" by filing taxes on time and keeping proper records. It identifies some common tax deductions for businesses and dispels myths about voluntary tax filing and "tax tricks". It aims to provide an overview of key tax perks and obligations for entrepreneurs.

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Entrepreneur: Tax Perks and Benefits The Good, Bad, and Ugly Jeff Wilson II CPA, CGMA, AFC Financial Planner
Entrepreneur Its what You dont know, that you dont 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
Whats 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 Selection Thing 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 Selection Things 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 Selection Things 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 dont 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 dont make a profit you dont have to report you business MY Tax guy gets me back a lot of money, he knows the tricks If I dont 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

More Related Content

Entrepreneurship and taxation

  • 1. Entrepreneur: Tax Perks and Benefits The Good, Bad, and Ugly Jeff Wilson II CPA, CGMA, AFC Financial Planner
  • 2. Entrepreneur Its what You dont know, that you dont 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.
  • 3. 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
  • 4. Whats 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
  • 5. 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 Selection Thing to Consider : Legal Liability, Taxes, Retirement Planning No Need for a Liability Protection
  • 6. 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 Selection Things to Consider : Legal Liability, Taxes, Retirement Planning Need Legal Protection & Losses are Expected in the Start-up Phase
  • 7. 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 Selection Things to Consider : Legal Liability, Taxes, Retirement Planning Need Legal Protection & Expected to be Profitable Start-up Phase
  • 8. 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% *
  • 9. 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
  • 10. What tax deductions are allowable Expense that can be REASONABLY associated with the operation of a Business for a profit motive.
  • 12. Fictional Tales and Tax Myths Filing taxes is voluntary (Wesley Snipes Tax Case) The first 5 years of business you dont 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 dont make a profit you dont have to report you business MY Tax guy gets me back a lot of money, he knows the tricks If I dont receive a 1099, I am not responsible for reporting income
  • 13. Questions Jeff Wilson II, CPA, CGMA, CFE, AFC President The WII Group, LLC jwilson@wiicpas.com www.wiicpas.com (240)-244-9813

Editor's Notes

  • #13: A individual with a net self-employment income of $400 or more must file a tax return. An activity is presumed to be a for-profit business if gross income exceeds deductions for three or more out of five consecutive years.. If a profit is not made in at least three out of five years, the taxpayer must prove that it is a for-profit business under the facts and circumstances test for it to be characterized as a trade or business.