1. business and industrial

How To Organize Your
Business And Minimize Your
Taxes
Bradley V. Shaw C.P.A.
Nathan R. Shaw C.P.A.
Shaw & Associates P.C.
2317 N. Hill Field Road, Suite 101
Layton, UT 84041
(801)728-7070
Website: www.shawandassoc.net
Business Structure
Examples of Business Entities:





Sole Proprietor
Partnership
C- Corporation
S- Corporation
Limited Liability Company (L.L.C.)
Your Scentsy Journey

Escential Consultant

Certified Consultant

Lead Consultant

Star Consultant

Super-Star Consultant

Director

Star Director

Super-Star Director
PHASE ONE
PHASE TWO
PHASE THREE
PHASE ONE
Escential Consultant – Lead Consultant
$0 to $1,000 in group sales per month





Sole Proprietor
File on Schedule C on personal tax return
Meet with a CPA to discuss your new business
Familiarize yourself with deductible expenses
Develop tax strategies and goals for future Scentsy
success
* Sole Proprietor is the most audited form of entity!
PHASE TWO
Lead Consultant – Super-Star Consultant
$1,000 to $6,000 in group sales per month
Time to start considering Incorporating your business
 Profitability is the determining factor
 Maintain regular contact with CPA for tax advice
 Tax Plan – Tax Plan – Tax Plan!!

PHASE THREE
Super-Star Consultant – Super-Star Director
$6,000 to $80,000 in group sales per month
You should be incorporated for greatest tax savings
 Meet with CPA regularly for tax planning
 Payroll / W2 wage for business owner
 Retirement Planning

Business Structure Continued…
A.
Liability Issues
B.
Tax Issues
Business Structure Liability Issues
Entity Type
Sole Proprietor
Partnership
C- Corporation
S- Corporation
L.L.C.
Liability Protection
NO
NO
YES
YES
YES
MUST ACT LIKE A CORPORATION!!
1.
Separate business bank account
2.
Maintain corporate records
Business Structure Tax Issues
Profit from
Business
Federal Tax (15%)
State Tax (5%)
Self Employment
Tax (15.3%)
Total Tax
Sole Proprietorship
Partnership or L.L.C.
$50,000
7,500
2,500
7,650
$17,650
S- Corp.
$50,000
7,500
2,500
3,825
$13,825
TAX SAVINGS $3,825
Tax Savings Assuming $100,00 Profit
$7,650
When to Incorporate?
1.
Depends on profit from business.
2.
Planning is the key – Stay in contact with CPA.
3.
Corporation cannot be back-dated.
4.
Better to incorporate earlier rather than later in
order to save tax.
5.
Sole Proprietor – Most Audited Entity
BOOKKEEPING
GROSS INCOME
--- EXPENSES
NET INCOME
GROSS INCOME
 Commissions
 Retail Sales
 Royalties
 Bonuses
EXPENSES (1)
ALL :
1. Ordinary
2. Necessary
3. Reasonable
EXPENSES (2)
Cost of Products
Advertising
 Dues
 Office Supplies
 Sales Tax
 Down-line Gifts
 Hostess Fees
 Postage / Shipping
 Printing
 Incentives for team members
 Conventions, Conferences & Booths
 Scentsy Parties


EXPENSES (3)
Cell Phone (50 to 75% deductible)
 Meals – Clients (50% deductible, write on

back of receipts)
Travel – Business Related
 Auto Expenses – 2009 mileage rate is 55 cents a mile

Required to keep a log, only deduct business mileage.
(Log example in packet)
Internet – 50% deductible
 Home Office - % of Utilities based on square

feet (Usually not a big deduction!)
EXPENSES (4)


NON-DEDUCTIBLE
Life Insurance
Dry Cleaning and Laundry
(Job must require a suit)


Fines and Penalties
Some Bank Charges (Returned Checks)
BOOKKEEPING
We recommend Quickbooks Pro
1. Simple
2. Inexpensive
3. User Friendly
Consultants in our Office
1. On-site Training
2. Remote Training
3. On-going Assistance & Help
Retirement Planning
There are Advantages to Start Saving Early
Here are the monthly savings required at different ages
to accumulate $1,000,000 by age 65, assuming an 8%
compounded rate of return*
Age When Savings Begin
25
35
45
55
Monthly Savings Required to Reach
Goal by Age 65
$285
$667
$1,686
$5,430
By Starting to save at an early age, your monthly savings amount
may be less than if you wait until closer to retirement age.
Taxable Vs. Tax Deferred Accumulation
Limiting taxes may be effective in achieving your financial goals. The following illustrates the end result of saving
$2,000 a year for 20 years. There might be a long-term advantage to accumulating money on a tax-deferred
basis.
The image below illustrates how deferring taxes can increase the value of saving over time. A hypothetical value
of $2,000 is invested in both a taxable and tax-deferred amount at 8% assumed interest in year-one. The
difference is fairly modest after 5 years. After several more years, however, the difference is more substantial.
Allowing the savings to grow tax-deferred for 20 years would have provided you with at least $20,000 more than
the taxable amount.
The Power of Compounding Consistency
Here you can see, hypothetically, that consistent, long-term savings can produce equal or even
higher results compared with savings with widely fluctuating returns.
Starting with a $100,000 balance, which scenario of gains (+) or losses (-) will produce a higher
cash balance in ten years*
Years
1
2
3
4
5
6
7
8
9
10
Scenario 1
+ 15%
+ 16
+ 8
(- 12)
+ 9
(- 3)
+ 17
(- 5)
+ 8
+ 11
Scenario 2
+ 6%
+6
+6
+6
+6
+6
+6
+6
+6
+6
Scenario 1 Fund Value at the end of 10 years = $178, 614
Scenario 2 Fund Value at the end of 10 years = $179,085
Financial Pyramid
Tax Planning Techniques
TIME INCOME & EXPENSES
A. Time your Income
1. Defer income into the next year
2. Delay sending year-end invoices
B. Increase Expenses
1. Purchase items your business will require in
immediate future to maximize deductions for
this year (stock up on office supplies).
2. Pay Bills Early- rent, insurance, utilities, cell
phone, subscriptions
3. Contribute to a Retirement Plan
Tax Planning Techniques
Continued..
4.
Contribute to a Health Savings Account
a. $5,950 for 2009 with a high deductible health plan – a high
deductible health plan is defined as a deductible f $1,150 for an
individual policy or $2,300 for a family policy.
5.
6.
Purchase an automobile
Throw a Company Holiday Party
a. The cost of such events is fully deductible.
7.
Hire Children -- $5,700 to each child
a. Children home from college or other family members who are
in low tax brackets can receive wages that are deducted at the
parent’s high tax rate and taxed at the children’s low tax rates.
Section 179 Depreciation Deduction

Eligible Property for the Section 179
Deduction:
1.
2.
3.
4.
Machinery & Equipment
Furniture & Fixtures
Trucks
Off-the-Shelf Computer Software
Section 179 Deduction Continued
5. Sport Utility-Vehicle Deduction
a. If an SUV with a gross vehicle weight of
more than 6,000 lbs. is purchased for business
use, $25,000 of its cost can be immediately
deducted, with the remainder deducted
through normal depreciation deductions.
Hot Topics With The IRS
A.
S-Corporations must pay a reasonable salary to
shareholders.
1. If you do not do this, your audit risk increases
significantly
B.
Company vehicles must be licensed in the name of the
company
Use mileage logs to compute business usage for
company vehicles (must be reasonable)
Keep receipts for all business deductions for at least
four years
C.
D.
What To Look For In A CPA FIRM
1.
Do they know your business?
2.
Do they plan with you or just prepare your tax
return?
3.
Response Time: Phone Calls or Emails?
4.
What costs are involved?
5.
Due Diligence -- Ask around!
Shaw & Associates, P.C.
Why Use Us?
1.
We know Scentsy – Look for the Scentsy link on our
website for specific Scentsy advice.
2.
Because we know Scensty – Usually less expensive than other
CPA firms.
3.
We specialize in tax planning & business organization.
4.
Phone calls & emails returned promptly.
5.
You will receive more personal attention. We know all of our
clients.
6.
Out of State – No Problem