Year-end planning for 2007 also involves maximizing annual contributions to your retirement plan accounts, since one year's limit cannot be added to the next year's if not taken in time. While contributions to IRAs may be applied retroactively if made before the filing deadline, an individual's elective deferral contribution made as an employee to a qualified plan must be made before the end of the calendar year.
Maximizing contributions to your retirement plan (or plans) before year end also allows you to reduce your adjusted gross income in direct proportion to those contributions. This in turn can give you the benefit of increasing the deductibility of medical and other deductions subject to adjusted gross income floors.
It is also not too early to think about a Roth IRA conversion plan if your present adjusted gross income is too high under the usual conversion rules. Although the adjusted gross income limit is not lifted until 2010 for a one-year only conversion opportunity, certain year-end maneuvers now can better set you up for maximizing conversion benefits in 2010. For example, if leaving employment, you may want to consider rolling over 401(k) balances to an IRA rather than leaving it in the plans.
Answer Provided By Andrew Taylor, CPA - Haffley, Taylor & Company
Showing posts with label new business owner. Show all posts
Showing posts with label new business owner. Show all posts
Monday, December 10, 2007
Tuesday, November 13, 2007
What type of business should I be?
One of the first decisions that you will have to make as a business owner is how the company should be structured. This decision will have long-term implications, so you are strongly encouraged to consult with an accountant and attorney to help you select the form of ownership that is right for you.
Organization of a business entity is done for several reasons, the most important being to limit liability and financial expenses to the capital dedicated to the venture. You need to respect the entity, keep proper records and take appropriate actions. This will preserve the "insulation of liability" and make key issues like "who owns what and what rights are there" much easier to determine down the road.
While there are several factors that determine how a business is initially organized, tax factors generally play a primary role. The form in which a business is organized depends on an analysis of the particular facts of the business. However, start-ups often are organized as a "flow-through entity" which is an entity that is subject to a single level of tax. Specific types of flow-through entities include partnerships, limited partnerships, LLCs and S corporations.
These are the entities of choice for most new business owners looking to formally organize. Subject to certain restrictions, start-up losses of such an entity may "flow-through" to its owners in the form of tax deductions. Alternatively, a company may be organized as a regular, or "C" corporation. A significant disadvantage to operating as a C corporation is that its earnings are exposed to "double taxation" which means that the corporation is subject to income tax on its earnings and the owners are taxed when the company distributes the earnings as a dividend. But there is no single "right" answer. It depends on what kind of business you have, who will own it, what sort of deductions it will generate and the accountant you use.
Answer provided by Chuck Roach - Roach Law
Organization of a business entity is done for several reasons, the most important being to limit liability and financial expenses to the capital dedicated to the venture. You need to respect the entity, keep proper records and take appropriate actions. This will preserve the "insulation of liability" and make key issues like "who owns what and what rights are there" much easier to determine down the road.
While there are several factors that determine how a business is initially organized, tax factors generally play a primary role. The form in which a business is organized depends on an analysis of the particular facts of the business. However, start-ups often are organized as a "flow-through entity" which is an entity that is subject to a single level of tax. Specific types of flow-through entities include partnerships, limited partnerships, LLCs and S corporations.
These are the entities of choice for most new business owners looking to formally organize. Subject to certain restrictions, start-up losses of such an entity may "flow-through" to its owners in the form of tax deductions. Alternatively, a company may be organized as a regular, or "C" corporation. A significant disadvantage to operating as a C corporation is that its earnings are exposed to "double taxation" which means that the corporation is subject to income tax on its earnings and the owners are taxed when the company distributes the earnings as a dividend. But there is no single "right" answer. It depends on what kind of business you have, who will own it, what sort of deductions it will generate and the accountant you use.
Answer provided by Chuck Roach - Roach Law
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