Drew Miles Tax Planning Advice and Tax Savings Tips

The current economic downturn has prompted lawmakers to reconsider the loss carryback rules under the Worker, Homeownership and Business Assistance Act of 2009. This would provide tax relief to all businesses except for companies receiving payments under the Troubled Asset Relief Program (TARP). Most businesses have an opportunity to use business losses from prior tax years under this rule.

The previous carryback rules limited loss carrybacks to two years. Now, taxpayers can elect to carryback a net operating loss (NOL) for a period of one to five years, or a loss from operations for four or five years to offset taxable income in those preceding tax years. However, losses carried back five years may offset no more than 50 percent of the taxable income in the fifth year.

Taxpayers must do several things to make the special carryback election. First, the taxpayer must have the federal income tax return of the NOL year or an amended return for the applicable NOL. Second, the statement must clarify that the taxpayer is electing to use the new NOL rules under Revenue Procedure 2009-52. Third, the taxpayer must state that they are not a TARP current recipient for the years, 2008 and 2009. Finally, the taxpayer must specify the length (3, 4, or 5 years) that they will elect for the NOL carryback period.

More Internal Revenue Service specifics on Revenue Procedure 2009-52 and other tax advice can be found at  http://www.irs.gov/newsroom/article/0,,id=217370,00.html.

Drew Miles wants you to avoid tax scams by documenting everything right.  Drew grew up working in a family business on Long Island, NY.  After passing the New York State Bar, Drew established his own firm where he practiced for 18 years.  In 2006, he set out to concentrate solely on his commitment to serve his clients and expand Pathfinder’s scope of programs.

His unique approach combines what he has learned, not only from his formal legal education, but also his “informal” business education and 25 years of entrepreneurial experience, in the development of programs designed to educate people in the fine art of building and preserving wealth.

Drew is an author, teacher, and international speaker.  His highly acclaimed book, Zero to Success, chronicles the steps every new business owner must take to ensure success.  He has been featured in Forbes, the Dallas Morning News, American Banker, and Yahoo Finance.  To date, he has helped over 5,000 business owners save over $100 million dollars in taxes.  That’s why he’s known throughout the United States and Canada as the “Tax Saving Attorney”.

The House of Representatives voted on December 3, 2009 to extend the estate tax rate for 2009 into 2010. The estate tax is the transfer of property to heirs or family members and the exemption amount is the amount each person can pass free of federal estate taxes.

The estate tax extension plan was enacted under the George W. Bush administration as the Economic Growth and Tax Relief Reconciliation Act of 2001. Initially, the act provided an increase in exemption tax rates followed by a gradual decrease per year.
The scheduled exemption rate per year was 50% for 2002, 49% for 2003, 48% for 2004, 47% for 2005, 46% for 2006, 45% for 2007, 2008, and 2009. The estate tax amount would have fazed out to 0% for 2010.

Under this tax plan, there would have been a 0% estate tax rate for 2010. The revised extension allows a $3.5 million exemption per individual ($7 million for married couples) and a top rate of 45 percent.

The repeal of the estate tax rate is critical but the Senate is likely to go along with this temporary fix, while preserving the option to adjust the permanent levels further later and to add a provision for inflation indexing of the exemption amount.

Drew Miles says to document everything right to avoid a tax scam.  Drew grew up working in a family business on Long Island, NY.  After passing the New York State Bar, Drew established his own firm where he practiced for 18 years.  In 2006, he set out to concentrate solely on his commitment to serve his clients and expand Pathfinder’s scope of programs.

His unique approach combines what he has learned, not only from his formal legal education, but also his “informal” business education and 25 years of entrepreneurial experience, in the development of programs designed to educate people in the fine art of building and preserving wealth.

Drew is an author, teacher, and international speaker.  His highly acclaimed book, Zero to Success, chronicles the steps every new business owner must take to ensure success.  He has been featured in Forbes, the Dallas Morning News, American Banker, and Yahoo Finance.  To date, he has helped over 5,000 business owners save over $100 million dollars in taxes.  That’s why he’s known throughout the United States and Canada as the “Tax Saving Attorney”.

Avoid being looked at as though you are running tax scams by documenting everything the right way.  Take automobile expenses for instance.  A solid tax-planning tip for business expense deductions is to deduct the use of your automobile expenses. Business mileage is vehicle use for business tasks such as client meetings, mileage to the office, a trip to Office Depot for business supplies and business-related long distance travel.

The Internal Revenue Service issued the 2010 standard mileage rates in its news release, IRS-2009-111 on December 3, 2009. The new mileage rates are slightly lower than 2009. The IRS mileage rates are estimated based on lower transportation costs in comparison to the year before. Beginning January 1, 2010, the standard mileage rates for vehicle use are $.50 per mile for business use; $.16.5 for medical or moving purpose; and $.14 per mile in service for a charitable organization.

Auto mileage deductions can be tracked by using a business mileage diary. Business destination and mileage are logged on a continual basis. This task can be frustrating, however, one way of minimizing the monthly logs is to track your odometer reading for three straight months and multiply the result by four. Another method for business owners who have high (80%) business mileage is to track only your personal mileage and deduct from the overall mileage.

Keeping a good documentation system is a worthwhile investment of time and consistency. It justifies business tax deductions, updates and organizes business records and audit proofs your business so that you save money and avoid being accused of running a tax scam on the IRS.

Drew Miles is an author, teacher, and international speaker. He worked as an attorney for 18 years before retiring in 2006 to concentrate solely on his commitment to serve his clients and expand Pathfinder Business Strategies’ scope of programs. His highly acclaimed book, Zero to Success, chronicles the steps every new business owner must take to ensure success. He has been featured in Forbes, the Dallas Morning News, American Banker and Yahoo Finance. To date, he has helped 4000 business owners save over $50 Million dollars in taxes. That’s why he’s known throughout the United States and Canada as The Tax Saving Attorney™.

Everyone wants to be financially free or as Robert Kiyosaki states, “to get out of the rat race”. Drew Miles and Pathfinder Business Strategies encourage clients to avoid using what some would say are tax scams but instead reduce their debt by paying the correct amount on taxes instead of over-paying them. Taxpayers reduce their current business and personal debt and gain income that can be applied to long-term retirement plans. The road to increased tax savings is to audit proof your expenses through a well-documented system using a six-column tax diary, organized files and a reimbursement log.

The “burden of proof” is the taxpayer’s responsibility to the IRS. IRS examiners are not required to help you keep your records. The consequences of not following the IRS tax guidelines are huge to the taxpayer. Possible actions are one-half of one percent a month delinquency penalty during the period that you fail to pay the proper amount taxes, 20% of underpayment attributable to negligence, disregard of the rules, and unreasonable deduction claims. Additionally, 75% of any underpayment attributable to fraud and loss of deductions on interests paid to the IRS, if they were due to a business deduction on your Schedule C.

Pathfinder Business Strategies’ tax record system shifts the burden of proof from the taxpayer back to the IRS. Three separate and distinct tax records are used: permanent files, regular files and a daily tax diary. This applies to all forms of business entities: “S” corporation, “C” corporation, LLC, or a sole proprietorship.

Permanent Files are the prior year’s tax returns, stock purchases and sales, equipment purchases and sales, and similar entries.  Generally, you want to keep any record that relates to more than one tax year in your permanent file including property purchase documents, closing statements, deeds, and other related expenses. Regular files are time sheets, part-time help records, receipts, invoices, canceled checks and other comparable evidence.

A tax diary is the most important of the documentation system. This consists of a permanent record that is separate from the receipts you keep for each item. The tax diary six-column strategy is detailed in the article, Drew Miles on Six-Column Tax Strategy for tracking Business Tax Deductions (Archives, August 2009). Details of expenses are logged into six columns labeled who, what, when, where, how much and mixed deductions. Examples of items for the six-column tax diary are pictures of your office (showing that it is separate from your living area), a printout from your realtor showing comparable cost of office space in your area, meal receipts for business dinners and training expenses, and auto expenses for mileage. Keep your plane tickets, parking and cab receipts (especially if over $75), and the training materials from the promoter to log in travel expenses.

Other elements to tracking expenses are a separate business checkbook with a three-part check and a reimbursement log.  The three-part check method is to send part one, the original of the check to the vendor; staple supporting evidence such as receipts or invoices to part two of the check and file it alphabetically in the vendor file; and to file part three in a numerical file for later reference. A reimbursement log tracks cash outlays and reimbursement expenses by date, description and amount.

Keeping a good documentation system is a worthwhile investment of time and consistency. It justifies business tax deductions, updates and organizes business records and audit proofs your business so that you save money.

Drew Miles is an attorney, author, teacher, and international speaker. He concentrates solely on his commitment to serve his clients and expand Pathfinder Business Strategies’ scope of programs. Visit http://www.pfbs.com for more information.
His highly acclaimed book, Zero to Success, chronicles the steps every new business owner must take to ensure success. He has been featured in Forbes, the Dallas Morning News, American Banker and Yahoo Finance. To date, he has helped 4000 business owners save over $50 Million dollars in taxes. That’s why he’s known throughout the United States and Canada as The Tax Saving Attorney™.

Drew Miles and Pathfinder Business Strategies advises its clients to utilize a tax strategy diary as an easy and safe method of audit proofing their tax records and avoid what some would say are tax scams. It is a simple form applied to business tax deductions using the five questions of “who, what, where, when and how much”.  Pathfinder Business Strategies teaches clients to use this application for each business expense so that their tax diary becomes more extensive as the year progresses.

The first action is to create a tax diary in column form. You can create this file in either a word document or a spreadsheet. A large paper pad can be used if you do not have a computer. Create six columns and label the first five “who” “what” “when” “where” and “how much”. Each row will contain the date of business tax expenses.

The second action is to open both your business and personal checkbook registers and records of cash receipts and begin reviewing expenses from January 1 on. Determine which expenses should have been registered as business expenses, enter the information into the tax diary by date, and answer the five questions.

For example, if you met with a client at a restaurant and inadvertently paid for it with a personal check or credit card, place it in your tax diary and use the five questions to qualify it as a business tax deduction.

The third action would be to add a sixth column to the tax diary strategy and label it “missed deductions”. If that expense was paid for from your personal funds and not reimbursed by the business, then place the amount of that expense in the sixth column.

Go through every business expense, line by line, from that year and enter the information into your tax diary. If a business expense was paid from your personal fund and not reimbursed by the business, then place the amount of that expense in the sixth column.

This may take a while to create an up-to-date business expense history but once you are finished, tally up the numbers in the sixth column. The result will be new identified business tax deductions you may have missed and will prove financially worthwhile to your business.  To avoid a potential tax scam, make sure the deductions you are indicating in your diary are legitimate business expenses.

Drew Miles is an attorney, author, teacher, and international speaker. He concentrates solely on his commitment to serve his clients and expand Pathfinder Business Strategies’ scope of programs. Visit http://www.pfbs.com for more information.

His highly acclaimed book, Zero to Success, chronicles the steps every new business owner must take to ensure success. He has been featured in Forbes, the Dallas Morning News, American Banker and Yahoo Finance. To date, he has helped 4000 business owners save over $50 Million dollars in taxes. That’s why he’s known throughout the United States and Canada as The Tax Saving Attorney™.

Pathfinder Business Strategies uses a powerful tax strategy process to identify both personal and business tax deductions that can save its clients thousands of dollars in unused or underutilized deductions. Be wary of tax tips or scams to buy something just to reduce your taxes.

Instead, Pathfinder Business Strategies will look at where your hard-earned money is currently going.  We want you to make more of those purchases with pre-tax dollars instead of after-tax dollars.  This is the cornerstone of lasting tax savings.

Our tax strategy resource contains over 400 tax deductions available to business owners in a simplified checklist of the IRS tax code. Pathfinder Business Strategies teaches clients how to take advantage of the list without eliminating items they think are not available and get the most out of possible business tax deductions.

Most clients are already claiming some deductions but our brains are wired to scan over things we think are not business tax deductions. For example, many business owners take tax deductions on auto business use. Many use the IRS standard rate deduction (50.5 cents for every business mile you drive) but there is also the actual cost method.

The actual cost method would take the car payment of $500 each month plus gas, oil changes, tires, car washes, tune-ups, etc. and add another $500 for a total of $1,000. If your car is used for 80% of business, you have a business tax deduction of $800 per month or $9,600 annually. That is an additional tax write-off of $6,960.

A written medical reimbursement plan allows you a tax write-off 100% of your documented medical expenses. Most people think only about health insurance and deductibles.  This is correct but there are many other items to include. Items that sustain or enhance your emotional, physical and mental energy toward your business are other potentials for business tax deductions.

Take for example a client that is worth around $70 million. He started each day with swim laps and a soak in his hot tub to counteract fifteen physical injuries and surgeries over several years. His daily routine was important to his job performance. His doctor was willing to write a note on his behalf and additionally, the inclusion of $125,000 in equipment for business tax deductions. Pathfinder Business Strategies saved this investor about $60,000 in tax deductions simply by reading through the list and applying the unused items in his home gym.

Items such as your children’s daycare expenses, annual vacations and even the family motor home are possibilities of business tax deductions depending upon your circumstances. Meals are a prime example. A meal with an old friend is 0% tax deductible but if the same person is a business potential, the meal is 50% deductible. If you are working on a business deadline during the meal, that is a 100% business tax deduction.

Pathfinder Business Strategies works with our clients through their previous tax returns, a list of assets and their twenty largest personal expenses. We are more interested in what you are spending money on (actual expenditures) than what you may purchase.  We teach clients to take advantage of unknown business tax deductions and to caution them on taking a tax deduction that they should not have.

Pathfinder Business Strategies can be found at http://www.pfbs.com and welcomes you to consult our online coaching programs and videos for more information on business tax deductions, tax tips and strategies.

Drew Miles is an author, teacher, and international speaker. He worked as an attorney for 18 years before retiring in 2006 to concentrate solely on his commitment to serve his clients and expand Pathfinder Business Strategies’ scope of programs. His highly acclaimed book, Zero to Success, chronicles the steps every new business owner must take to ensure success. He has been featured in Forbes, the Dallas Morning News, American Banker and Yahoo Finance. To date, he has helped 4000 business owners save over $50 Million dollars in taxes. That’s why he’s known throughout the United States and Canada as The Tax Saving Attorney™.

A well-planned tax strategy is the key to tax savings with the primary benefit of increased asset protection and income tax reduction.  Individuals are hesitant to maximize their business tax deductions because they believe it to be risky. Proper tax deductions are not risky. What is risky is falsifying records or failing to document the deductions you are utilizing. Beware of scams that suggest hiding income by putting it in an offshore trust or international business corporation. These scams and schemes will earn the wrath of the IRS.

Pathfinder Business Strategies has researched over 400 available business tax deductions yet most individuals only utilize about 10%. Most individuals pay for their expenses with after-tax dollars. A corporation pays their expenses with pre-tax dollars. The difference is that businesses subtract these first, then pay taxes on the balance. Individuals pay expenses on what is left. Our goal is to teach our clients how to find and maximize significant income tax deductions.

You need to understand the tax codes. Pathfinder Business Strategies has found a few tax codes within the 12,000 IRS tax code pages that we call the Golden Tax Secrets.

There are numerous tax savings in converting your home into a business corporation. The key is not to add additional expenses just because they are deductible, but to convert those things that you are already spending money on into legitimate business expenses. Begin this process by reviewing your current expenses and ways to convert these expenses to business expenses. Begin by making of a list of your monthly checkbook, credit card bills for the previous year and cash receipts.

Look at Section 119 of the Internal Revenue Code. You can deduct the obvious items, but you can also deduct more, such as home repair, home insurance, some or all meals/clothes and heat, phone and other utilities under certain conditions. You can write-off many other expenses including health insurance, travel expenses, retirement plans, dependent care plans, auto insurance and college funds.

Section 74 covers achievement awards for safety and longevity. There must be some inherent danger in your job to receive the safety award. If you do not electrocute yourself when you turn on the computer or you have been there from the beginning, you can receive up to $1,600 a year in awards. Activities like operating heavy equipment, construction, driving a truck would certainly comply.

Section 79 covers group term life insurance. You can receive up to $50,000 in coverage and the premiums are not included in your gross income. The premium is a total business tax deduction to the business and is tax-free to you.

Section 105 covers health insurance. If you already have a health insurance program, the corporation can reimburse you with no limit, is not included in your income and is a complete business tax deduction.

Section 106 deals with insured medical plans except as otherwise provided in this section. The corporation can have a medical plan and pay up to 100% of the plan for you. In addition, this benefit is not included in your income and is tax deductible to the corporation.

Section 119: A home-based business that is considered the business or corporate headquarters may qualify for meals and lodging if it is a requirement of the employer to stay there on the premises. This can be tax deductible to the corporation and not included as part of your income.

Section 120 covers a group legal plan.

Section 125 cafeteria plan includes a variety of employee benefits. This could include Section 105 under the unlimited reimbursement for health insurance premiums or Section 106 health care plan paid by the company. There is also Section 127 for educational assistance. You can allot up to $5,250 per employee for continuing education and seminars, which will not be included in the employee’s income. Seminars relating to your business can be considered continuing education. You can be reimbursed for these expenses under the education category, or you can be reimbursed under Sections 162 or 212, which covers seminars.

Section 243: If your corporation owns stock in other corporations or receives dividends from stocks, bonds and mutual funds there is 80%-100% forgiveness on capital gains. For example, if you receive $1,000 in dividends, $800 of it disappears as though it did not exist.

The I.R.S. has specific tax advice and regulations concerning each kind of business tax deductible expense. It is imperative, therefore, that you work closely with your accountant to ensure that you comply with these rules. Each tax deduction require proper documentation. A tax diary is your secret weapon. It provides all the information required to audit proof your records.

Pathfinder Business Strategies welcomes clients to consult our online coaching programs and videos for more information on business tax deductions, tax tips and strategies.  Visit http://www.pfbs.com for more information.

Drew Miles is an author, teacher, and international speaker. He worked as an attorney for 18 years before retiring in 2006 to concentrate solely on his commitment to serve his clients and expand Pathfinder Business Strategies’ scope of programs. His highly acclaimed book, Zero to Success, chronicles the steps every new business owner must take to ensure success. He has been featured in Forbes, the Dallas Morning News, American Banker and Yahoo Finance. To date, he has helped 4000 business owners save over $50 Million dollars in taxes. That’s why he’s known throughout the United States and Canada as The Tax Saving Attorney™.

Pathfinder Business Strategies encourages its clients to learn more ways as investors to save on business deductions and tax credits. An effective tax strategy for property investments is the IRC Code Section 1031. When an investor sells business or investment property, they generally will have to pay taxes on the profit at the time of sale.

Section 1031 allows a tax-deferred exchange by allowing sellers to reinvest the proceeds in similar property. Gains are tax-deferred but are not tax exempt. The exchange can include like-kind property exclusively or it can include like-kind property along with cash, liabilities and property that are not like-kind. Individuals, C corporations, S Corporations, partnerships (general or limited) limited liability companies, trusts and any other taxpaying entities are eligible under this Section 1031 tax strategy.

Section 1031 is an exchange of like-kind properties. Like-kind refers to the type or character of the property but not its state or quality. The deferred exchange can be a simultaneous exchange of one property for another or a reverse exchange that allows the investor to purchase replacement property before the current property is sold or traded.

Both properties must be owned for trade, business or investment and should be similar in nature, character or class. For example, a residential rental house is like-kind to vacant land. However, personal use properties such as a primary residence or vacation home do not qualify nor do real property in the United States and real property outside the United States. In addition, specific types of property excluded from Section 1031 are inventory or stock in trade; stocks, bonds or notes; other securities or debt; partnership interests; and certificates of trust.

Two time limits are required or the entire gains on held properties are subject to business tax. The first is that the seller has 45 days from the sale date to identify potential replacement properties in writing, signed and delivered to the replacement property seller or the qualified intermediary. The second is that the replacement property must be received and the exchange complete within 180 days of the sale date.

Deferred and reverse exchanges do have certain restrictions under Section 1031. Taking control of cash or other proceeds before the exchange is complete may disqualify contract and make ALL profit subject to business taxes. If cash or other proceeds that are not like-kind property are accepted at the final exchange, the transaction will still qualify as a like-kind exchange. Any proceeds that are not like-kind property are subject to business taxes. Section 1031 exchanges are reported on the IRS Tax Form 8824.

A method of avoiding early receipt of cash is to use a qualified intermediary (also known as an exchange facilitator) to hold the proceeds until the sale of property is complete. A qualified intermediary will have knowledge and experience with tax codes and regulations; business tax credits and business tax deductions; safeguarding funds such as fidelity bond and an Errors and Omissions Policy to protect the investor’s funds and business tax credits; and qualifications such as longevity in the field and membership in Federation of Exchange Accommodators. Investors cannot act as their own agents nor can real estate brokers, lawyers, accountants, current employees or anyone employed by you in the previous two years.

Finally, beware of the improper sale or tax scam that supports the exchange of non-qualifying vacation or second homes and market the exchange as “tax-free” or “tax write-off” rather than tax-deferred. Any agent that advises you to accept receipt or business tax credits before the conclusion of the exchange is not promoting a professional tax strategy for your business.

Pathfinder Business Strategies welcomes clients to consult our online coaching programs and videos for more information on business tax deductions, tax tips and strategies.

Related links:
IRS Section 1031:    http://www.irs.gov/businesses/small/industries/article/0,,id=98491,00.html
IRS Form 8824:        http://www.irs.gov/pub/irs-pdf/f8824.pdf

Drew Miles is an expert at teaching you how to avoid a tax scam.  He is also an author, teacher, and international speaker. He worked as an attorney for 18 years before retiring in 2006 to concentrate solely on his commitment to serve his clients and expand Pathfinder Business Strategies’ scope of programs. His highly acclaimed book, Zero to Success, chronicles the steps every new business owner must take to ensure success. He has been featured in Forbes, the Dallas Morning News, American Banker and Yahoo Finance. To date, he has helped 4000 business owners save over $50 Million dollars in taxes. That’s why he’s known throughout the United States and Canada as The Tax Saving Attorney™.  Visit http://www.pfbs.com for more details.

In part 2 of Choosing the right entity for your company Drew Miles discusses a tax scam to watch out for and tells you how corporations can help you take advantage of many business tax deductions.  This can feel overwhelming to new business owners but Pathfinder Business Strategies covers this information more thoroughly in our online coaching programs and shows you the fundamentals for setting up an efficient tax strategy for your business and how to avoid a tax scam such as business tax deductions for offshore trusts or International Business Corporations.

Pathfinder Business Strategies has found that these entities are often associated with a tax scams. If your business is structured properly, there is no reason to reach offshore in other jurisdictions; we can accomplish all the necessary asset protection and tax strategy tools with domestic entities.

There are five types of business entities that investors can take advantage of many business tax deductions, tax write offs and other efficient tax strategies: Sole Proprietorship, General Partnership, Corporations (“S” and “C”), Limited Partnerships and Limited Liability Companies (LLC’s).

Today we are discussing corporations, partnerships and LLC’s.

A corporation is a separate legal entity that is governed by state law. It operates through bylaws and resolutions written and adopted by shareholders and directors. The state of incorporation operates on its own statutes, rules and regulations based on whether it is an “S” or “C” corporation.

The “S” corporation is a separate legal entity for liability purposes. Profits and losses flow through to its shareholders individually that each must pay taxes on. An “S” corporation cannot retain earnings, have no more than 35 shareholders and must have a December 31 year-end for business tax purpose. This can be an advantage if there are corporate losses that could help the shareholders with business tax deductions and write offs.

A “C” corporation is similar to an “S” corporation in that they are separate legal entities and have stockholders. The difference is that there are no limits on the types or number of shareholders and they can retain earnings. They also can elect another date for their year-end and business taxes are at a corporate rate.

Limited Partnerships are businesses where ownership and management are separate. This is used frequently for business investments. An example would be the intent to purchase a rental property; you would manage the property yourself and the limited partners are the investors to finance the project. As the general manager, you facilitate the day-to-day operations and are responsible for liabilities that may occur. Limited partners are not. Their investment is their only risk.

The Limited Partnership has a method of asset protection called a charging order. The charging order protects the L.P. from a creditor by blocking asset rights to the L.P., no access to voting rights or control, access to ONLY the distributed profits of the company, and creates a business tax obligation on the creditor so long as there is a profit, even if that profit is not distributed to the partners. Bottom line, L.P. protects your business and allows no control or power to a creditor.

The Limited Liability Company (LLC) is an entity with all the tax savings of “S” and “C” corporations and the power of the charging order. However, with a LLC, only one member is required, there is enormous asset protection, lawsuit deterrent power through the charging order and the flexibility of business tax deductions as an “S” or “C” corporation. For this reason, Pathfinder Business Strategies encourage clients to use LLC’s to benefit from business tax deductions and tax credits.

Drew Miles is an expert at teaching you how to avoid a tax scam.  He is also an author, teacher, and international speaker. He worked as an attorney for 18 years before retiring in 2006 to concentrate solely on his commitment to serve his clients and expand Pathfinder Business Strategies’ scope of programs. His highly acclaimed book, Zero to Success, chronicles the steps every new business owner must take to ensure success. He has been featured in Forbes, the Dallas Morning News, American Banker and Yahoo Finance. To date, he has helped 4000 business owners save over $50 Million dollars in taxes. That’s why he’s known throughout the United States and Canada as The Tax Saving Attorney™.  Visit http://www.pfbs.com for more details.

Choosing what kind of entity is right for your company can feel overwhelming to new business owners. Pathfinder Business Strategies covers this information more thoroughly in our online coaching programs but here are the fundamentals for setting up an efficient tax strategy for your business and how to avoid a tax scam such as business tax deductions for offshore trusts or International Business Corporations. Pathfinder Business Strategies has found that these entities are often associated with a tax scam. If your business is structured properly, there is no reason to reach offshore in other jurisdictions; we can accomplish all the necessary asset protection and tax strategy tools with domestic entities.

There are five types of business entities that investors can take advantage of many business tax deductions, tax write offs and other efficient tax strategies: Sole Proprietorship, General Partnership, Corporations (“S” and “C”), Limited Partnerships and Limited Liability Companies (LLC’s).  In this blog we only going to cover two of the five entities, Sole Proprietorship and General Partnerships.  The other three will be covered in our next blog.

Sole Proprietorship is the easiest method of business. There are no corporate documents to file except possibly a business license. You simply print up your business cards and go. However, the danger to a sole proprietorship is that your business AND personal assets are at risk from business liabilities. That means your investments, your home, your car, and your bank accounts are not protected or separate. In addition, sole proprietorships are subject to a self-employment tax of 7% on the first $85,000 in income. The cost of set-up and maintenance is a small percentage of that amount. Pathfinder Business Strategies recommends looking at structures for efficient tax strategy.

A General Partnership is an association of two or more people in a business. No formal filing is required and you do not need a written agreement. It is also the most risky of the five entities. Because you have one or more partners, you are responsible for not only your own business liabilities or problems but also those of your partners. General Partnerships are considered as joint and several liabilities, which mean that if a judgment is held against your business, the complaint can be enforced separately or jointly among the business partners. You could be responsible in a lawsuit primarily because you have more assets than your partners do. This appeals to some owners because of multiple partners and investments but generally, Pathfinder Business Strategies discourages clients from this financial tax strategy, also.