Business Finance

Q: How do I determine a “reasonable salary” for my S-Corp? A: Start with what you’d pay an unrelated employee to do your job, then adjust for profit, duties, time spent, and local market data. Pay at least that amount as W-2 wages; treat the rest of the profit as distributions. Too low invites IRS […]

Q: Does moving income through a licensing agreement between my S-Corp and a C-Corp safely reduce tax? A: Only if it’s real. The deal must serve a bona-fide business purpose, charge arm’s-length royalties / commissions, and be fully documented – otherwise the IRS can disallow the deduction and you could end up paying tax on […]

Q: Does pairing a C-Corp with an S-Corp actually lower your overall tax bill? A: Only in narrow cases. Splitting income lets you defer the second layer of C-Corp tax, but you must leave profits inside the C-Corp for years and avoid Accumulated Earnings Tax penalties. TL;DR Defers double taxation only if profits stay in […]

Q: Does the 21% corporate tax rate make a C-Corp cheaper than an S-Corp? A: No. After double taxation and lost pass-through benefits, most owners pay more overall with a C-Corp. TL;DR Corporate tax (21%) plus dividend tax (up to 23.8%) usually exceeds a top-bracket S-Corp rate. You lose the 20% QBI deduction and state […]

2021 and all of its tax deadlines are upon us! Below is a quick guide of the most important dates to keep in mind this calendar year. January 15th: due date to pay 4th quarter estimated taxes. February 1st: Due date to send out 1099s and W-2s to recipients. Due date to file 1099-NECs (formerly […]

Longtime readers will remember that I have a more favorable view on debt than most – the right types of debt that is. We’ve written about the dangers of excessive debt, but more often have talked about how the intelligent use of debt can be quite advantageous (examples can be found here, here, and here). […]

2020 and all of its tax deadlines are upon us! Below is a quick guide of the most important dates to keep in mind this calendar year. January 15th: due date to pay 4th quarter estimated taxes. January 31st: Due date to send out 1099s and W-2s to recipients. Due date to file 1099s/1096s with […]

“Facts are stubborn things, but statistics are pliable.” ― Mark Twain I’m a big proponent of tracking key metrics in your business. (For those unfamiliar with the term, a metric is simply a quantifiable measure that businesses use to track, monitor and assess the success or failure of various business processes). A large portion of my […]

“They used to tell me I was building a dream With peace and glory ahead Why should I be standing in line Just waiting for bread?   Once I built a railroad, I made it run Made it race against time Once I built a railroad, now it’s done Brother, can you spare a dime?” […]

Bookkeeping is the bane of most business owners’ existence. But ignoring our books or putting them on the back burner can be one of the costliest mistakes we ever make. A few years back, SCORE conducted a poll asking entrepreneurs what was the worst part of owning a small business. A whopping 40% answered bookkeeping and taxes. […]

2019 and all of its tax deadlines are upon us! Below is a quick guide of the most important dates to keep in mind this calendar year. January 15th: due date to pay 4th quarter estimated taxes. January 31st: Due date to send out 1099s and W-2s to recipients. Due date to file 1099s/1096s with amounts […]

A few years ago, I wrote an article on gold and the fallacy of so-called “safe” investments. One of the major points in that article was that (over the long-term) “low risk” investments can be very expensive because of opportunity cost. Compounding interest is powerful, and the change of a few percentage points of return […]