Graduating From an LLC?

Many business-owner taxpayers 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 I don’t get hit with unexpected taxes next April?”

The answer? PLAN AHEAD!

The window of opportunity to pay less tax in 2015 is closing. Pretty soon, you’ll be stuck with whatever your plan is now.

Here’s a simple formula for you: More time to plan = Better tax plans = Less tax

Sure, there are strategies to pay less tax, find more deductions and above all else, reduce the chances for audit on your returns.

But if you want to really save on taxes, then plan your 2015 tax strategy. There is still time.

Over the last month, there have been times when I have met with a 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 it’s an oversimplification, but when it comes down to it, there really are just three different tax rate tables:

1) Individual income tax rates
2) Corporate income tax rates
3) Trust income tax rates
Depending on your structure, and your business characterization, you might be operating under one, both, or all three of these rate tables.

So let’s take advantage of all of the planning opportunities available to you. If your income is at the higher brackets, you can easily save $10,000 or more per year in taxes just by making some tweaks in your business structures.

Plan ahead. Reap the rewards.