Presentation on theme: "How To Organize Your Business And Minimize Your Taxes Bradley V. Shaw C.P.A. Nathan R. Shaw C.P.A. Shaw & Associates P.C. 2317 N. Hill Field Road, Suite."— Presentation transcript:
How To Organize Your Business And Minimize Your Taxes Bradley V. Shaw C.P.A. Nathan R. Shaw C.P.A. Shaw & Associates P.C. 2317 N. Hill Field Road, Suite 101 Layton, UT 84041 (801)728-7070 Website: www.shawandassoc.net
Business Structure Examples of Business Entities: Sole Proprietor Sole Proprietor Partnership Partnership C- Corporation C- Corporation S- Corporation S- Corporation Limited Liability Company (L.L.C.) Limited Liability Company (L.L.C.)
Your Scentsy Journey Escential Consultant Escential Consultant Certified ConsultantPHASE ONE Certified ConsultantPHASE ONE Lead Consultant Lead Consultant Star ConsultantPHASE TWO Star ConsultantPHASE TWO Super-Star Consultant Super-Star Consultant Director Director Star DirectorPHASE THREE Star DirectorPHASE THREE Super-Star Director Super-Star Director
PHASE ONE Escential Consultant – Lead Consultant $0 to $1,000 in group sales per month Sole Proprietor Sole Proprietor File on Schedule C on personal tax return File on Schedule C on personal tax return Meet with a CPA to discuss your new business Meet with a CPA to discuss your new business Familiarize yourself with deductible expenses Familiarize yourself with deductible expenses Develop tax strategies and goals for future Scentsy success Develop tax strategies and goals for future Scentsy success * Sole Proprietor is the most audited form of entity!
PHASE TWO Lead Consultant – Super-Star Consultant $1,000 to $6,000 in group sales per month Time to start considering Incorporating your business Time to start considering Incorporating your business Profitability is the determining factor Profitability is the determining factor Maintain regular contact with CPA for tax advice Maintain regular contact with CPA for tax advice Tax Plan – Tax Plan – Tax Plan!! Tax Plan – Tax Plan – Tax Plan!!
PHASE THREE Super-Star Consultant – Super-Star Director $6,000 to $80,000 in group sales per month You should be incorporated for greatest tax savings You should be incorporated for greatest tax savings Meet with CPA regularly for tax planning Meet with CPA regularly for tax planning Payroll / W2 wage for business owner Payroll / W2 wage for business owner Retirement Planning Retirement Planning
Business Structure Continued… A. Liability Issues B. Tax Issues
Business Structure Liability Issues Entity Type Liability Protection Entity Type Liability Protection Sole Proprietor NO Partnership NO C- Corporation YES S- Corporation YES L.L.C. YES
MUST ACT LIKE A CORPORATION!! 1. Separate business bank account 2. Maintain corporate records
Business Structure Tax Issues Sole Proprietorship Partnership or L.L.C.S- Corp. Profit from Business$50,000$50,000 Federal Tax (15%)7,500 7,500 State Tax (5%)2,500 2,500 Self Employment Tax (15.3%)7,650 3,825 Total Tax$17,650 $13,825 TAX SAVINGS $3,825 Tax Savings Assuming $100,00 Profit$7,650
When to Incorporate? 1.Depends on profit from business. 2.Planning is the key – Stay in contact with CPA. 3.Corporation cannot be back-dated. 4.Better to incorporate earlier rather than later in order to save tax. 5.Sole Proprietor – Most Audited Entity
BOOKKEEPING GROSS INCOME --- EXPENSES NET INCOME
EXPENSES (1) ALL : 1.Ordinary 2.Necessary 3.Reasonable
EXPENSES (2) Cost of Products Cost of Products Advertising Advertising Dues Dues Office Supplies Office Supplies Sales Tax Sales Tax Down-line Gifts Down-line Gifts Hostess Fees Hostess Fees Postage / Shipping Postage / Shipping Printing Printing Incentives for team members Incentives for team members Conventions, Conferences & Booths Conventions, Conferences & Booths Scentsy Parties Scentsy Parties
EXPENSES (3) Cell Phone (50 to 75% deductible) Cell Phone (50 to 75% deductible) Meals – Clients (50% deductible, write on back of receipts) Meals – Clients (50% deductible, write on back of receipts) Travel – Business Related Travel – Business Related Auto Expenses – 2009 mileage rate is 55 cents a mile Auto Expenses – 2009 mileage rate is 55 cents a mile Required to keep a log, only deduct business mileage. (Log example in packet) Internet – 50% deductible Internet – 50% deductible Home Office - % of Utilities based on square feet (Usually not a big deduction!) Home Office - % of Utilities based on square feet (Usually not a big deduction!)
EXPENSES (4) NON-DEDUCTIBLE Life Insurance Life Insurance Dry Cleaning and Laundry Dry Cleaning and Laundry (Job must require a suit) Fines and Penalties Fines and Penalties Some Bank Charges (Returned Checks) Some Bank Charges (Returned Checks)
BOOKKEEPING We recommend Quickbooks Pro 1. Simple 2. Inexpensive 3. User Friendly Consultants in our Office 1. On-site Training 2. Remote Training 3. On-going Assistance & Help
Retirement Planning There are Advantages to Start Saving Early Here are the monthly savings required at different ages to accumulate $1,000,000 by age 65, assuming an 8% compounded rate of return* Monthly Savings Required to Reach Age When Savings Begin Goal by Age 65 25 $285 25 $285 35 $667 35 $667 45 $1,686 45 $1,686 55 $5,430 55 $5,430 By Starting to save at an early age, your monthly savings amount may be less than if you wait until closer to retirement age.
Taxable Vs. Tax Deferred Accumulation Limiting taxes may be effective in achieving your financial goals. The following illustrates the end result of saving $2,000 a year for 20 years. There might be a long-term advantage to accumulating money on a tax-deferred basis. The image below illustrates how deferring taxes can increase the value of saving over time. A hypothetical value of $2,000 is invested in both a taxable and tax-deferred amount at 8% assumed interest in year-one. The difference is fairly modest after 5 years. After several more years, however, the difference is more substantial. Allowing the savings to grow tax-deferred for 20 years would have provided you with at least $20,000 more than the taxable amount.
The Power of Compounding Consistency Here you can see, hypothetically, that consistent, long-term savings can produce equal or even higher results compared with savings with widely fluctuating returns. Starting with a $100,000 balance, which scenario of gains (+) or losses (-) will produce a higher cash balance in ten years* YearsScenario 1Scenario 2 1 + 15% + 6% 1 + 15% + 6% 2 + 16 + 6 2 + 16 + 6 3 + 8 + 6 3 + 8 + 6 4 (- 12) + 6 4 (- 12) + 6 5 + 9 + 6 5 + 9 + 6 6 (- 3) + 6 6 (- 3) + 6 7 + 17 + 6 7 + 17 + 6 8 (- 5) + 6 8 (- 5) + 6 9 + 8 + 6 9 + 8 + 6 10 + 11 + 6 10 + 11 + 6 Scenario 1 Fund Value at the end of 10 years = $178, 614 Scenario 2 Fund Value at the end of 10 years = $179,085
Tax Planning Techniques TIME INCOME & EXPENSES A. Time your Income 1. Defer income into the next year 2. Delay sending year-end invoices B. Increase Expenses 1. Purchase items your business will require in immediate future to maximize deductions for this year (stock up on office supplies). 2. Pay Bills Early- rent, insurance, utilities, cell phone, subscriptions 3. Contribute to a Retirement Plan
Tax Planning Techniques Continued.. 4. Contribute to a Health Savings Account a. $5,950 for 2009 with a high deductible health plan – a high deductible health plan is defined as a deductible f $1,150 for an individual policy or $2,300 for a family policy. 5. Purchase an automobile 6. Throw a Company Holiday Party a. The cost of such events is fully deductible. 7. Hire Children -- $5,700 to each child a. Children home from college or other family members who are in low tax brackets can receive wages that are deducted at the parents high tax rate and taxed at the childrens low tax rates.
Section 179 Depreciation Deduction Eligible Property for the Section 179 Deduction: Eligible Property for the Section 179 Deduction: 1. Machinery & Equipment 2. Furniture & Fixtures 3. Trucks 4. Off-the-Shelf Computer Software
Section 179 Deduction Continued 5. Sport Utility-Vehicle Deduction a. If an SUV with a gross vehicle weight of more than 6,000 lbs. is purchased for business use, $25,000 of its cost can be immediately deducted, with the remainder deducted through normal depreciation deductions.
Hot Topics With The IRS A. S-Corporations must pay a reasonable salary to shareholders. 1. If you do not do this, your audit risk increases significantly B. Company vehicles must be licensed in the name of the company C. Use mileage logs to compute business usage for company vehicles (must be reasonable) D. Keep receipts for all business deductions for at least four years
What To Look For In A CPA FIRM 1.Do they know your business? 2.Do they plan with you or just prepare your tax return? 3.Response Time: Phone Calls or Emails? 4.What costs are involved? 5.Due Diligence -- Ask around!
Shaw & Associates, P.C. Why Use Us? 1.We know Scentsy – Look for the Scentsy link on our website for specific Scentsy advice. 2.Because we know Scensty – Usually less expensive than other CPA firms. 3.We specialize in tax planning & business organization. 4.Phone calls & emails returned promptly. 5.You will receive more personal attention. We know all of our clients. 6.Out of State – No Problem