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You Are A Sole Proprietor: How About A Solo 401(k)

I am seeing more and more people quit the corporate America lifestyle and venture into becoming their own business owner.  This shape of a business owner can be a freelancer, consultant, or someone who actually starts up a ‘brick and mortar’ operation.    Many of these folks will ask questions about whether they should incorporate their business, which I have discussed in other articles.    Once they become profitable, they often ask which kind of retirement plan would suit them the best.   For someone who is a sole business owner, the Solo 401(k) has been around for about a decade and provides a great alternative to helping maximize your retirement contributions.   Here’s a little history on the Solo 401(k) and how it can be a smart money move for your business. The Solo 401k came about in 2002 after Congress passed Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). EGTRRA added some small paragraphs to the tax code that put ...

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I’m a Freelancer – Should I Set Up a Corporation?

If you are starting a business as a freelancer, you have a choice of the legal type of business structure (entity) that you choose. There are advantages and disadvantages among becoming a Subchapter S Corporation, a C Corporation, a Limited Liability Corporation, a Sole Proprietor, or a Partnership. Since there are both legal and tax implications attached to each type, it is best to get your lawyer, financial advisor, and/or accountant involved in the decision making process. Most people want to pay a little tax as possible, and incur the least amount of paperwork overhead when running their own business. In this article we will detail the facts that you need to consider, along with their consequences, so you can have a good starting point of reference when you meet with your legal and tax professionals. About Being A Sole Proprietor This type of entity will happen de facto if you choose no other form of entity for your business. ...

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6 Potential Red Flags That Can Get You Audited?

You never know ultimately what could cause you and audit once this tax season is over.   Here are 6 potential red flags to avoid that could put you in hot water. You make stupid mistakes– Information has to be entered on to a tax return one way or another.   If you choose to do your taxes by hand, math errors could be very costly for you in the long run if you get audited.    You should consider using a tax program or a professional to avoid making addition, subtraction, multiplication, or division errors.   Sometimes, you may miss filling in certain boxes as well which can be another trigger for the IRS. You have a big mouth– You should never brag to anyone privately or publicly that you pulled a fast one on the IRS.  Especially with the proliferation of sites like Facebook and Twitter, the IRS has become much more intelligent in watching these sites for people who don’t report ...

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5 Tax Mistakes Business Owners Make

Part of putting together an effective tax management strategy is gaining an understanding of what you can and cannot deduct from your tax return.   I see business owners that make mistakes every single day.  Every CPA or accountant seems to have a slightly different slant on the tax code, but here are a few that may be able to help you increase your bottom line as you grow your business. Wrong Entity Structure – If you are getting into business for the first time, it’s really important to sit down with someone qualified to discuss entity structure.    The reality is that you can set up your business as a sole proprietor, partnership, limited liability Corporation, S-Corporation, C-Corporation, or having multiple structures depending on how many businesses and whether real estate you own will be involved with the business.   Since these entities all work slightly different, a huge tax mistake I see owners make is having the wrong structure for the ...

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