Consulting businesses are highly unique, in that the income generated is primarily based upon the Principal’s time, and the expenses are limited to support staff, rent, and cost of running the business. As a result, there is a unique need to focus on the business operations and costs, not just the tax implications. While the tax return will reflect the previous year’s expense levels, our advice and consulting can help you bring those costs down. Our network of clients and business associates can help you year round, not just during tax season. We host Bette’s Business Book Club, where Bette leads a discussion on zoom about a business book to help broaden business owners’ knowledge. As a service professional, we understand the needs of a consulting business CPA firm to respect your time and help inform business decisions. You can join in the discussion, or just listen to the insights from fellow business owners and financial professionals.
Corporate Veils- Why They Matter
The Corporate Veil in both corporations and limited liability companies is what separates you from your business entity financially and legally. That is what the limited liability stands for in LLC, and is the main reason for forming a corporate entity or LLC. However, if you co-mingle the assets between your organization and your personal finances, or between two or more of your organizations, you can lose that protection, which is called “piercing the corporate veil.” The act of defending your corporate veil falls to your lawyer in a court of law, but the primary determination of the legitimacy of your corporate veil stems from your accounting, operating, and cash management behaviors. Your consulting business CPA firm should be able to help you properly document things and build processes to avoid problems.
We have experience with Corporate Accounting, Partnership Accounting, multiple level LLC structures, and all the various iterations that can cause business owners to get tripped up. By engaging in regular reviews of your finances, and identifying and fixing problems quickly, we can help you protect your corporate veil from attack and help you protect your business assets.
Tax Issues specific to Consulting Businesses your CPA Firm Should help with.
Consulting businesses seem simple on a superficial level, you sell your time, receive income often documented in a 1099 Form. But the complexity comes with the changes to the Meals Deduction (formerly Meals and Entertainment), how you track and bill clients for costs incurred, and making sure that you file a 1099 for any contractors that you hire in the process. In our educational section, we have a How to Fill out 1099 Misc Forms video.
Tax Issues for Consulting Businesses doing business in Multiple States your CPA Firm needs to help with.
Originally created to tax professional athletes by rival teams, most states with an income tax will tax non-residents that earn money in that state. If you travel to multiple states to conduct business, depending on the states involved, you may need to track sales and expenses by state. Setting up your accounting and receipt tracking system will help us maximize your deductions and minimize your tax bill.
Your Car as a Business Expense
Every service business expects to write-off their transportation as a business expense, and often has a rude awakening when they are not able to. It is entirely possible to write off the cost of your vehicle and much of the maintenance of it, but only with proper record keeping. With modern smartphones and data systems, this can take only a few minutes a day, and may make the difference of thousands of dollars come tax time. Using a neighborhood tax accountant that just reviews your receipts may save you a few dollars in accounting costs, but can cost thousands of dollars in deductions by not setting up systems ahead of time. We’ll work with you to maximize your deductions and get as many of your automotive expenses to be work related as legally permitted.
Putting Your Spouse on Payroll
For single income families with a primarily non-working spouse, putting the spouse on payroll can be a critical financial planning tool. While this only applies when the spouse actually works in the business, few entrepreneurs don’t have their spouse come in and help, whether it is with the billing late at night, or helping with office work as needed. By working with you to document your spousal involvement and setup payroll, we can increase your ability to defer taxes in retirement accounts, plus receive additional dependent care and other tax credits. It is important to document things properly, as the IRS will make sure you are following the rules. They even have a website section on Married Couples in Business. Many tax credits only apply if both spouses work, and the IRS defines work as receiving a W-2, so properly setting up spousal payroll is important for family business owners.
Evaluating Consulting Business CPA Firms
Make sure that the CPA Firm you go with has leadership that understands the needs of the business owners, not just how to manage the business tax return. You need to holistically look at the finances of the owners when advising the business on tax matters, retirement accounts, and other decisions that impact both sides of the tax equation. You will also benefit from expertise in adjusting your chart of accounts to match your consulting business needs. By tracking your expenses in a managerially useful way, you’ll be able to optimize your business, and figure out where your money is going in real time. Just like you serve your clients and help them make better decisions, we’re here to help you.