With our nation celebrating its 242nd birthday, and all of this talk about “independence” flying around, I have a question for you — one that I think you should think hard about:
Are you achieving the independence you wanted in your Metropolitan NYC business?
As you know, it is hard — and it is LONELY — to be a Metropolitan NYC business owner in this environment. The media is bombarding your customers with messages of chaos and fear … and, of course, you can’t help but have some of those messages trickle into your own consciousness as well.
Which is why it’s so important for you to have a clear handle on the bottom line for your business — and on ALL of the tax implications you’ll be facing under the new tax code, and how to get ahead of them.
In short, how to achieve actual independence.
For instance, we have the business entity question.
Is a C-Corp or S-Corp Right for Your Metropolitan NYC Business?
We used to use S-Corps because it avoided the double tax issue of a C-Corp. Double tax of corporate profits of course refers to the fact that corporate profits are taxed when earned and then again when you take the cash out, in the form of a dividend, which is taxable to the person. And, conversely, S-corps only pay the single tax.
Right now, the highest individual rate is 37%. The corporate rate is 21% and the dividend rate is 20%. This means that having an S-Corp or other pass thru pays a net 4% lower tax than the double tax of the C-Corp.
Plus, there are the possibilities with the 20% “pass through” deduction.
But sometimes a C-Corp can still make sense. Because one advantage to the C-Corp is the timing — you don’t have to pay the 20% dividend rate up front. This means that you have use of that money during a time period — and the earnings on that chunk of money might end up being more than 4% of the initial profit, putting you in a scenario with a greater net worth at the end.
These are the kinds of analyses that we can make for you. An S-corp might be the best vehicle for your business, or it could be something entirely different.
Look … I often write to you about marketing and sales. That’s because growing the “top line” (revenue) is still the easiest way for you to grow your bottom line.
But the second-best way to grow your bottom line is to avoid all of the unnecessary expenses and taxes which so many businesses end up paying, simply because they didn’t plan ahead of time.
So, I’d like to make it easy on you to do both.
When I meet with a business owner, I often wear many hats — CFO, Marketing Advisor, COO, etc. — truly whatever fits the need of my client most precisely. Because business owners can make rash decisions in times of perceived crisis (like during “tax season”) — and they often have unforeseen complications down the road.
Let’s get ahead of the process.
Allan J Rolnick
Allan J Rolnick, CPA, CTC