What You Need To Know About Incorporating Your Business

Most US-based small businesses are getting eaten alive in taxes! That statement has proven itself true over and over again. However, while small business owners want to save money, many are literally afraid of incorporating their companies. The paperwork, the additional reports, having a set payroll amount each month, and other visions swirl around their heads. Those visions could be costing you a ton!

Let me take a few minutes to explain what you need to know about incorporating your business. While it certainly isn’t a move every business will want to make, there are definitely some large benefits associated with incorporation.

MYTH
Incorporating means I can’t take money whenever I want it.

TRUTH
Yes you can! This is a MYTH that holds a lot of small business owners back from incorporating. If you set a payroll amount for yourself, then decide you want/need more money, you simply write yourself another check and call it an "owner distribution" or a "draw."

MYTH
There’s too much paperwork involved once you incorporate. I don’t have the time.

TRUTH
There are some additional forms you have to complete. There are some additional taxes you have to pay. HOWEVER... read this carefully... for the three or four extra forms and the cost of the additional taxes, most businesses will still save when compared to counting every dollar you make toward personal income.

MYTH
The only good reason to incorporate is for personal protection. The difference in taxes isn’t that much.

TRUTH
While incorporating your business will help protect you from lawsuits and from having your personal property seized, there are more benefits than that. The tax savings can be quite significant.

MYTH
With the attorney’s fees, the CPA’s fees, the additional income tax returns, and the forms I have to file quarterly, it’s just not worth it. I won’t really save any money.

TRUTH
Every case is different; however, most small businesses will more than make up the $1500 - $2000 it costs to incorporate within the first six months to one year. Also, most small businesses will save about 50% on taxes after they incorporate. (A qualified CPA will be able to look at your books and give you a more accurate figure.)

MYTH
I’ll have to hold meetings and keep lots of records that I don’t have time to keep.

TRUTH
Not if you register as a "closed" S-Corporation. This means you have waived the requirement to hold all those meetings and keep all those records.

How Do You Get Specific Details?

Contact a qualified CPA in your local area. He or she can give you detailed information on how much it will cost to set everything up, and - most importantly - how much you will save in taxes

Incorporation is not something to be afraid of. In fact, if you’re one of the many who will save 50% off your taxes in the next year, it’s something to go after with a vengeance! 

 by: Diane Hughes

Tax Advantages of Incorporating a Business - Travel Expense Deductions

Los Angeles, CA (ArticleCity via ArticleCity.com) October 25, 2006 -- Kevin Wessell, renowned asset protection and estate planning expert said today that business travelers should be aware of a legal and proper program for a US tax deduction that allows them to travel on business, perhaps spend some leisure time on their trip, and deduct 100% of the transportation costs for the trip. Wessell heads LA area-based Companies Incorporated that provides corporation formation in all 50 US states, asset protection, offshore trusts accounts and estate planning. Information on Mr. Wessell and CI’s suite of services for businesspersons can be accessed via their web site at http://www.companiesinc.com.

Deducting Business Trips

Wessell points out: “As you probably know, when taking a vacation is the main purpose for traveling, the IRS does not allow you to deduct your transportation expenses. Whereas, if the main reason for the trip is a business purpose, the IRS says you can deduct 100% of your transportation cost for travel within the US. Therefore, the aim is to be sure that the main purpose of the trip is business. There is no law against having a bit of fun while on your business trip. Do things right and you can deduct 100% of your transportation expenses.”

He went on to point out, “Here is one provision that is quite controversial but has passed the IRS muster: If you do business on Wednesday through Friday and stay Saturday and Sunday, are the last two days tax deductible? The answer is quite straightforward - it depends. If the purpose of staying the weekend is to have a couple of vacation days, it probably is not. However, if the purpose is to save money on airfare because a Saturday night stay lowers the plane fare more than the costs of staying an extra night or two, it likely is.”

It’s essential to figure out exactly what is required to deduct travel without raising red flags. If an audit reveals you have crossed the line, not only will you not be allowed your deductions, but you will also be required to pay interest on the amounts owed plus pay a penalty of 5%. Moreover, if the IRS determines that you have purposefully broken the rules, the penalty can be as high as 50%, according to Wessell.

He added, “Prior to writing off your business trip, be sure your deductions are legitimate. The size of your deductions is reliant upon the purpose of your trip. The IRS classifies travel as either entirely business, primarily for business or primarily for personal reasons.”

Wessell said in conclusion, “The most audited business type is the sole proprietorship or partnership - more specifically, the Schedule “C” (self employment form). The least audited type of business is a corporation. So, having the corporation pay for a business trip is less likely to be taken to task than taking the same deduction through the previously mentioned business types. As an employee, you can deduct un-reimbursed travel expenses if you need to do business away from home. Transportation costs, lodging, laundry, telephone and Internet expenses are some of the available deductions. Usually, meals are 50% deductible too.”

About Companies Incorporated

Established in 1977, privately-held Companies Incorporated serves both large and small businesses throughout the USA and in some foreign locales with incorporating services, establishing LLCs (limited liability companies) to creating offshore companies aimed at protecting assets to legally reducing annual taxes. CI also provides services to establish S corporations and non-profit organizations as well. CI holds national seminars on its various services, most recently to a sell-out gathering of professionals in a prestigious Las Vegas hotel.

by: Kevin Wessell