“Time To Switch Entities” Says Somerset Accountant
March 7, 2012
Last week was deadline week for corporations, and as my Somerset Area small business accounting staff and I were slogging through these corporate returns, I knew that this morning I would be writing to you about this topic.
A Somerset Area Small Business Accountant Asks: Is It Time To Explore A New Business Structure?Many Somerset Area business owners are currently asking me the question, which I actually think is the *best* one they can ask if they’re hit with an unexpected tax bill:”What can I do so this never happens again?” The answer? PLAN AHEAD! Here’s a simple formula for you: More time to plan = Better tax plans = Less tax And the #1 question for most taxpayers right now is how to pay less tax on their 2011 tax return. (That’s the tax return you’re currently filing.)
Sure, there are strategies to pay less tax, find more deductions and above all else, reduce the chances for audit on your return, even now.But if you want to really save on taxes, then start planning your 2012 tax strategy. Over the last month, there have been many times when I have met with a new client, who owns a business (usually an LLC or a Sole Proprietorship), and they mention how hard they are getting hit with taxes, year after year.
So, as you might expect, I offer to take a look at their tax returns for the past few years, and after doing so, I sometimes say to them,”Exactly why aren’t you operating as an S-Corp?” The answer is usually pretty similar, “I don’t know? … Should I be one?” or “My prior accountant said I wasn’t ‘big enough’ to be an S-Corp” or “My prior accountant said I ‘didn’t make enough money’ to be an S-Corp or ‘don’t have any risk’ in my business, so I didn’t need to be an S-Corp.” Etc, etc. I have rarely met an S-Corp structure which I didn’t like. But it is true — they don’t necessarily work for everyone. But, if done right, they often can return 4-5 figures of savings per year for a business.
Perhaps for you, years ago an LLC made sense, but it doesn’t anymore. And, when you ask your other Somerset Area accountant about it and they respond with one of the responses above, then you know that it is time to get a second opinion. Plan ahead. Reap the rewards.