If you were to start a business, what structure would you be?

[Greenman]

Originally posted by: Qacer
I'm in FL, and it's a state that allows a 1 person LLC. I have considered applying for a sole proprietorship because it's simple and offers similar tax deductions for my business leads (e.g. tax deductions on machine lease, supplies, part utilities for machine operations, etc.), but the one thing that I wasn't too fond of was the fact that any money sitting in my business account gets taxed 25% (?) even if it is there for future expenditures.

That's an easy one to solve, stop billing before the end of the year, or keep billing and just don't deposit the checks until January 1st. I always deplete my business account just before the end of the year.

 

[Qacer]

Originally posted by: Greenman
That's an easy one to solve, stop billing before the end of the year, or keep billing and just don't deposit the checks until January 1st. I always deplete my business account just before the end of the year.

Are there any federal rules governing the amount of money you can withdraw from your business account? I was thinking the same way, too. Before the end of the year, just transfer the money to a personal account and put it back in the beginning of the new year. But that just sounds too easy.

 

[GoingUp]

I started one last year and its an LLC for legal liability.

 

[Specop 007]

We did LLC

 

[smack Down]

Originally posted by: Qacer

Originally posted by: Greenman
That's an easy one to solve, stop billing before the end of the year, or keep billing and just don't deposit the checks until January 1st. I always deplete my business account just before the end of the year.

Are there any federal rules governing the amount of money you can withdraw from your business account? I was thinking the same way, too. Before the end of the year, just transfer the money to a personal account and put it back in the beginning of the new year. But that just sounds too easy.

You don't get tax because you have money in bank account you get taxed because the difference between the bank account last year and this year is called profit or losses.

Don't worry about taxes in the first few years. If you pay enough for it to matter then your doing better then most start ups. Unless your really pulling in some money don't even bother with quarterlies (all business are required to do them not matter what status) because the penalties are less then the cost of doing them.

 

[Greenman]

Originally posted by: Qacer

Originally posted by: Greenman
That's an easy one to solve, stop billing before the end of the year, or keep billing and just don't deposit the checks until January 1st. I always deplete my business account just before the end of the year.

Are there any federal rules governing the amount of money you can withdraw from your business account? I was thinking the same way, too. Before the end of the year, just transfer the money to a personal account and put it back in the beginning of the new year. But that just sounds too easy.

NO NO NO! That's called fraud and the IRS takes a pretty dim view of it.
What matters is what your income is as of 12/31. If you have a good year and you're looking at getting rapped by the IRS, you can simply stop depositing checks a month or two before the end of the year. As an example, last year I was due a 50k payment from a client in November, I didn't bill them until late December, and didn't deposit the check until January. So my income for the year was reduced by 50k.

 

[CubicZirconia]

If you have a good year and you're looking at getting rapped by the IRS, you can simply stop depositing checks a month or two before the end of the year

It doesn't matter whether or not a check is deposited. If a check is made available to you, it is considered income.

 

[Qacer]

Originally posted by: Greenman
NO NO NO! That's called fraud and the IRS takes a pretty dim view of it.
What matters is what your income is as of 12/31. If you have a good year and you're looking at getting rapped by the IRS, you can simply stop depositing checks a month or two before the end of the year. As an example, last year I was due a 50k payment from a client in November, I didn't bill them until late December, and didn't deposit the check until January. So my income for the year was reduced by 50k.

I was reading Nolo Press' Tax Savvy for Small Business. You may think twice about what you are doing. This is an example from their book:

Constructive income. Constructive income is a legal doctrine that taxes things that you don?t actually have in your hands, but that you have a right to. Whether you grab it or not, it?s income the moment it?s available.

EXAMPLE: On December 1, 2006, Raylene gets a $5,000 check from BigCo for her Web design services performed in November. Raylene looks at her books and sees she has already made so much in 2006 that this $5,000 will be taxed at the highest individual tax rate (35%). Raylene is planning on taking a lot of time off traveling in 2007, and her income will be drastically reduced. She would like to hold off cashing the check until after January 1, 2007, to be taxed at a lower tax rate. Can she do it? Sorry, Raylene. The $5,000 was constructively received in 2006, and so is income in 2006, not 2007.