Are you planning for year end? A year end check-up is overdue.

Year end brings the opportunity to look at ways to minimize taxes if possible. The American Taxpayer Relief Act of 2012 (ATRA) which became effective in 2013translates to an impact on your 2013 tax return. 

Every dollar is especially important in a small business and each of us has a unique situation – call so we can discuss your needs and options while there is time to effect change. Issues to consider: 

Health Care Reform - Affordable Care Act (ACA)

What is the effect on your business? There are still many questions yet to be answered but its important to identify a long-term plan that anticipates the eventual rollout of the reporting and penalties for employers.

“The Small Business Health Care Tax Credit can help offset the cost of coverage for many companies by providing a credit against taxes, but there will be changes beginning in 2014. The credit rises to 50% of premiums paid (35% for small tax-exempt employers), but it only applies to small businesses that participate in the Small Business Health Options Program (SHOP) Marketplace. We will be happy to answer your questions about the SHOP, as well as other provisions of the ACA” reports America Counts on CPAs.

Did you know there is a 90-day limit for eligibility for employer-provided health coverage for new hires?

New Tax Laws

• New business property after tax deductions.
• Individuals within the highest income tax rates will see tax rates on dividend income and long-term capital gains rise to 20% . High-income business should consider ways for minimizing their tax liabilities.
• Proper foresight and planning may minimize invest income tax for high earners.
• Changes to alternative minimum tax (AMT) might now affect you.
• Investment income taxes might now change the business entity organization that suits your business needs and tax situation. 
• New simplified optional safe-harbor method allowing for home office deductions - is it right for you?

Other Key Considerations

• Use the options for greatest tax benefits for retirement options that suit you and your business. 

• New business this year? Proper deductions should be discussed before year end.

• If your business provides services, sells products or otherwise has a presence in more than one state, it may be subject to tax withholding, filing and payment requirements in many of those states. We can help you ensure that you are compliant with their laws and make use of all tax planning opportunities.

Call for a check-up today.  We don't want to miss any opportunity to reduce expenses for your business. 

Is incorporation the right choice for my business?

For this the last post in our series on tax structures and choosing the right one for your start-up or small business, we will focus on corporations. 

What is a corporation?

A corporation is defined first and foremost as a separate legal entity distinct from its owners. Corporations have many of the same rights and privileges as individuals. Corporations can sue and be sued, enter into contracts, loan and borrow money, own assets, hire and fire employees and pay taxes.

The main reason for choosing incorporation is protection of personal assets. Because of the limited liability aspect of incorporating shareholders enjoy profits through stock appreciation or dividends but are not personally liable for company debts.

Corporations can exist in perpetuity regardless of persons involved leaving, dying or divesting in the business. There are three main types of corporate classifications, General Corporations, C-Corporations and S-Corporations.

The three main types of corporate classification

General Corporations - With this type of business structure the shareholders are the owners of the company. The number of shareholders allowed to invest in the company is unlimited. The stock or shareholders are not personally liable for company debt.

The personal liability of stockholders is generally limited to the amount of their investment. This is the most common type of corporate class structure. Advantages of forming a General Corporation include better access to capitol and certain tax-free benefits. However, this type of structure is often subject to more state and federal regulations.

C-Corporation - The first main distinction of a C-Corporation from an S-Corporation is that C-Corporations are taxed as an entity and profits are simply distributed as dividends. C-Corporations do not have to file financial statements and have a great deal of business flexibility. However, C-Corporations must have a director who offers available shares for sale to current investors before making them available to the general public. C-Corporations are typically big name brands.

S-Corporation - This type of structure is fairly common for small and medium size businesses that want both the protection of personal assets and the “pass through” taxation of a partnership structure. An S-Corporation’s profits, losses and tax liability are reported on the personal income tax returns of the owners or shareholders. Thus an S-Corporation avoids the double taxation of a C-Corporation. This model is advantageous for businesses with many owners or shareholders.

How do I decide which tax structure is best for my business?

In our series on deciding which tax structure is best for startups and new businesses we have covered Sole Proprietorships, Limited Liability Companies, Partnerships and Incorporation. We have provided some of the key points, pros and cons of each to help guide new business owners in making the right choice. However, because each business and each entrepreneur is unique it is a good idea to get some professional advice about your new venture.

Tom Bulger, CPA can help you weigh the pros and cons of each type of business structure. Tom believes in entrepreneurship and wants to help you succeed in business. He has been helping people achieve their business goals for over 25 years. Talk to Tom Bulger, CPA today.

Do you have questions about choosing a tax structure for your startup or small business? Post your thoughts and tell us about your new venture in our comment section below.

Check back for our next post on tips for managing your cash flow.

Why choose a local CPA over a big megafirm?

Many business owners are attracted to the idea of a large and powerful organization behind them especially during tax season. However, despite the prestige of hiring a well-known big firm, is there any real benefit to your business? 

In the last few years several major accounting firms have merged with equally sized competitors consolidating into megafirms. These megafirms have thousands of associates, massive offices in all the major metropolitan cities of the world and long lists of impressive clients. But with these mergers come layoffs, downsizing and lots of reorganization.

Whether you are a small or medium size business just starting out or in your tenth year, best accounting practices and thorough tax preparation is vital to your bottom line today and your plans for growth tomorrow. Therefore when hiring a CPA one should look beyond the big name and think about what they really want and need in an accounting firm. 

One of the pitfalls of a big firm is the influx of personnel. Big firms are practically a revolving door of new recruits coming in and seasoned professionals jumping ship for better opportunities. This can be problematic for a business owner who has built a relationship with one CPA only to be reassigned to another within the firm. It is a CPA's business to understand the vision of his or her client and help them achieve it. 

While most of us enjoy expressing our plans for growth and the overall successes of our endeavors, we don't want to re-explain it quarterly to the new CPA handling our accounts. Small and medium sized business owners can feel lost in the shuffle of big firms and be left wondering what all that power and prestige did for their business. 

Local more stable accounting firms offer just that, stability. More often then not the CPA you start with will be your CPA for the duration of your relationship with the firm. A good CPA will serve as a partner, advisor and analyst in helping you to improve and maintain good financial health of your business and assets. This requires gaining insight into your business, building rapport with you and your team, and establishing trust through expertise and professionalism. 

Rome wasn't built in a day and while it may not take quite as long to build your empire, it isn't going to happen over night. Having to continually re-establish a working relationship with your big firm's latest recruit can interrupt the continuity vital to reaching your financial goals. In addition to stability and continuity a local accounting firm's professionals are a part of your community. They are your neighbors and have a much more vested interest in the success of your business then say a CPA in New York or Chicago. A good local CPA will have insight specific to the needs of your community and be able to suggest best practices for your business to better meet those needs. 

Bottom line, a business owner hires a CPA to improve their bottom line. Big firms have tremendous overhead. You may never visit their office at Rockefeller Plaza but you are paying for it in fees. You may never meet in person any of the various professionals associated with your accounts as they come and go through that big firm revolving door. But any smart business owner knows how expensive it is to recruit and train new employees. Low employee retention bloats the cost of doing business and translates into higher costs to the client, which generally is not going to improve their bottom line. 

Have you gotten lost in the shuffle at a big firm? 

Tom Bulger, CPA has over 25 years of experience helping local businesses thrive. 

Check back for our next post when we will discuss Estate Planning And Tax Updates for 2013 and how the changes may affect you.