Viewing posts categorised under: Business Ownership
28Jun
Hire your children to save taxes for your business and your family
Business Ownership

 

It can be difficult in the current job market for students and recent graduates to find summer or full-time jobs. If you’re a business owner with children in this situation, you may be able to provide them with valuable experience and income while generating tax savings for both your business and your family overall.

Shifting income

By shifting some of your business earnings to a child as wages for services performed by him or her, you can turn some of your high-taxed income into tax-free or low-taxed income. For your business to deduct the wages as a business expense, the work done by the child must be legitimate and the child’s wages must be reasonable.

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14Jun
Business owners: Put your successor in a position to succeed
Business Ownership

 

When it comes time to transition your role as business owner to someone else, you’ll face many changes. One of them is becoming a mentor. As such, you’ll have to communicate clearly, show some patience and have a clear conception of what you want to accomplish before stepping down. Here are some tips on putting your successor in a position to succeed.

Key information

Find ways to continuously pass on your knowledge. Too often, vital business knowledge is lost when leadership or ownership changes — causing a difficult and chaotic transition for the successor. Although you can impart a great deal of expertise by mentoring your replacement, you need to do more. For instance, create procedures for you and other executives to share your wisdom.

Begin by documenting your business systems, processes and methods through a secure online employee information portal, which provides links to company databases. You also could set up a training program around core business methods and practices — workers could attend classes or complete computer-based courses. Then, you can create an annual benchmarking report of key activities and results for internal use.

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13Jun
Dot the “i’s” and cross the “t’s” on loans between your business and its owners
Business Ownership

 

It’s common for closely held businesses to transfer money into and out of the company, often in the form of a loan. However, the IRS looks closely at such transactions: Are they truly loans, or actually compensation, distributions or contributions to equity?

Loans to owners

When an owner withdraws funds from the company, the transaction can be characterized as compensation, a distribution or a loan. Loans aren’t taxable, but compensation is and distributions may be.

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12Jun
Consider the tax consequences before making an employee a partner
Business Ownership

 

In today’s competitive environment, offering employees an equity interest in your business can be a powerful tool for attracting, retaining and motivating quality talent. If your business is organized as a partnership, however, there are some tax traps you should watch out for. Once an employee becomes a partner, you generally can no longer treat him or her as an employee for tax and benefits purposes, which has significant tax implications.

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16May
Operating across state lines presents tax risks — or possibly rewards
Business Ownership

 

It’s a smaller business world after all. With the ease and popularity of e-commerce, as well as the incredible efficiency of many supply chains, companies of all sorts are finding it easier than ever to widen their markets. As a result, many businesses quickly find themselves engaging in interstate commerce.

But therein lies a risk: Operating in another state means possibly being subject to taxation in that state in accordance with that state’s tax laws when nexus is established. As a result, the potential exists for increased complexity in monthly, quarterly, and annual filing requirements and reporting. 

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04May
Make sure the IRS won’t consider your business to be a “hobby”
Business Ownership

 

If you run a business “on the side” and derive most of your income from another source (whether from another business you own, employment or investments), you may face a peculiar risk: Under certain circumstances, this on-the-side business might not be a business at all in the eyes of the IRS. It may be a hobby.

The hobby loss rules

Generally, a taxpayer can deduct losses from profit-motivated activities, either from other income in the same tax year or by carrying the loss back to a previous tax year or forward to a future tax year. But, to ensure these pursuits are really businesses — and not mere hobbies intended primarily to offset other income — the IRS enforces what are commonly referred to as the “hobby loss” rules.

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02May
Do you know the tax implications of your C corp.’s buy-sell agreement?
Business Ownership

 

Private companies with more than one owner should have a buy-sell agreement to spell out how ownership shares will change hands should an owner depart. For businesses structured as C corporations, the agreements also have significant tax implications that are important to understand.

Buy-sell basics

A buy-sell agreement sets up parameters for the transfer of ownership interests following stated “triggering events,” such as an owner’s death or long-term disability, loss of license or other legal incapacitation, retirement, bankruptcy, or divorce. The agreement typically will also specify how the purchase price for the departing owner’s shares will be determined, such as by stating the valuation method to be used.

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23Mar
Take small-business tax credits where credits are due
Business Ownership

 

Tax credits reduce tax liability dollar-for-dollar, making them particularly valuable. Two available credits are especially for small businesses that provide certain employee benefits. And one of them might not be available after 2017.

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16Mar
Understanding the statement of cash flows
Business Ownership

 

The statement of cash flows highlights the sources and uses of cash. It’s arguably the most misunderstood and underappreciated part of a company’s annual report. Here’s an overview of how this statement is organized and what the Financial Accounting Standards Board (FASB) has recently done to make it more user-friendly.

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28Feb
Can the WOTC save tax for your business?
Business Ownership

 

Employers that hire individuals who are members of a “target group” may be eligible for the Work Opportunity tax credit (WOTC). If you made qualifying hires in 2016 and obtained proper certification, you can claim the WOTC on your 2016 tax return. Whether or not you’re eligible for 2016, keep the WOTC in mind in your 2017 hiring, because the credit is also available for 2017.

In fact, the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) extended the WOTC through 2019. The PATH Act also expanded the credit beginning in 2016 to apply to employers that hire qualified individuals who have been unemployed for 27 weeks or more.

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