So, you work for yourself, but the IRS doesn’t tax you as a business owner. You are self-employed and taxed as such.
Did you realize there are huge tax advantages to owning your business?
“Just by forming an LLC (A Limited Liability Company) and filing as an S-Corporation” says leading tax expert Randall Boll, “the tax laws change significantly.”
What exactly determines if you are a legitimate business? According to Randall Boll, finding your business identity comes down to a few important factors:
Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
Whether the time and effort you put into the activity indicates you intend to make it profitable.
Whether you depend on income from the activity for your livelihood.
Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business)
Whether you change your methods of operation in an attempt to improve profitability.
Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
Whether you were successful in making a profit in similar activities in the past.
Whether the activity makes a profit in some years and how much profit it makes.
Whether you can expect to make a future profit from the appreciation of the assets used in the activity.
That’s a lot, but in simpler terms, in the eyes of the IRS, if you have an entity and seek to make a profit, you are a business owner and THIS is going to be your big win.
Being self-employed has its own little wins over being employed, but owning the business has some truly amazing advantages when it comes to tax. Let’s take a look at some of the ways that Randall Boll and the BollitProof Philosophy can help you win as a business owner:
1 Avoid the 15.3% self-employment tax. You can legally avoid this just by forming an LLC
( A Limited Liability Company) and filing as an S-Corporation. That’s a massive $15,000 tax savings on $100,000!
2 Forming an entity for asset protection. As a self-employed individual, if someone sues you, they can come after your bank account, your house, your car, and any other assets you have. If you have an LLC, structured as an S-Corporation and somebody sues you individually, they cannot go after your business assets. If they sue your business, they can’t go after your personal assets. It gives you that separation between your business assets and your personal assets.
3 The endless deductions. Beat the IRS at their own game as a business owner and increase your deductions tenfold from travel to technology and everything in between.
The top small business tax deductions include:
– Business Meals
– Work-Related Travel Expenses
– Work-Related Car Use
– Business Insurance
– Home Office Expenses
– Office Supplies
– Phone and Internet Expenses
– Business Interest and Bank Fees
– Professional Service Fees
– Salaries and Benefits
– Charitable Contributions
– Child and Dependent Care
– Energy Efficiency Expenses
– Foreign-Earned Income Exclusion
– Medical Expenses
– Real Estate Taxes
– Moving Expenses
– Retirement Contributions
– Advertising and Promotion
– Startup Expenses
“In fact,” Randall Boll explains, “some small business expenses are 100% deductible.”
These expenses include:
– Furniture purchased entirely for office use is 100 percent deductible in the year of purchase.
– Office equipment, such as computers, printers, and scanners is 100 percent deductible.
– Business travel and its associated costs, like car rentals, hotels, etc. are 100 percent deductible.
– Gifts to clients and employees are 100 percent deductible, up to $25 per person per year.
– If you’re self-employed and pay your own health premiums, you can deduct those at 100 percent.
– Your annual business phone bills are 100% deductible.
4 Decreased chance of an audit. Being a business owner, you automatically significantly reduce the chance of being audited by the IRS. If you are self-employed and earn $100,000, you have a 2.4% chance of being audited every year. That’s 2 people out of every 100 individuals making $100,000 getting audited.
As an S-Corp, your chance goes down to just a .2% chance of being audited – that’s 12 times more likely to be audited if you remain self-employed, for the exact same amount of money earned! Randall Boll’s BollitProof philosophy argues that everything in your financial world should always:
–Lower your taxes
–Increase cash flow
–Protect your assets
With that in mind, setting yourself up as a business owner allows you to do those three things legally and to the fullest extent.