Business Tax Planning

As tax professionals, we know that business owners are very good at what they do. Whether your business is a trade, service, retail or anything else, you’ve carved out an important niche. Your customers also expect you to respond when they need you.

Don’t look at a tax professional as a “wish-list” item when you have more money. What we offer is navigating tax regulations for you, so that you can focus on your customers and generating income. Every hour you spend trying to navigate business taxes on your own is an hour of income lost. How many hours does it take you now, and how much lost income is that?

Entity Selection

Entity selection for businesses is a very important step which should not be overlooked. The IRS often automatically designates your entity’s tax status based on the information provided when applying for an Employer Identification Number. However, their automatic designation may not be right for you. Certain elections, such as to be taxed as an S-Corporation, have short deadlines for a new business startup. Not changing your tax status can result in having to file a return for the original entity, such as changing from a partnership to a corporation.

An S-Corporation is not always the best tax status, even though many people claim it saves a lot of money. Be sure to check out our webinar on why an S-Corporation may not result in tax savings … and how to fix it.

Available tax structures for businesses include the following:

• Sole proprietor for single owner businesses and single member LLCs. This is the default when applying for an EIN as a sole proprietor or single member LLC.
• C-Corporation for any LLC, corporation or unincorporated venture. This is the default when selecting to be taxed as a corporation or applying for an EIN as a corporation.
• S-Corporation for any LLC, certain corporations or certain unincorporated ventures. The S-Corporation must be selected when applying for an EIN or separately on Form 2553. The election is effective for the upcoming taxable year, if timely filed.
• Partnership for multi-member Limited Liability Companies and partnership ventures. This is the default for any partnership applying for an EIN or a multiple member LLC. Partnership tax rules are some of the most complex for entities, and opting out requires selecting to be taxed as a corporation.

Which one is right for you requires personalized advice and tax planning. Each one as their own advantages and disadvantages.

Can an S-Corp Change To Another Tax Status?

Sometimes business owners have regrets about electing S-Corporation status. A question that may be asked is whether it is possible to change to another tax status. Generally speaking, this is so complex that it may be easier to abandon the entity and start over. The accounting nightmare, tax return preparation and tax forms to file make starting over (even though it is a nuclear option) much less expensive and far more attractive.

Comprehensive Guidance by an Experienced Tax Professional

Would you only want to interact with your tax preparer during tax season or would you like to hear from your tax professional throughout the year?

As experienced tax professionals, we know that you can benefit from tax planning and support in running your business throughout the year. For that reason, the Somerset Tax Partners difference is to provide ongoing guidance throughout the year, provide you with tax savings ideas, ensure that your business keeps up with annual documentation, and be available year-round to answer your questions. The best business tax returns come from owners who planned ahead.