[Rhodes22-list] Tax Advice?

[Joseph Hadzima]

Well actually the S Corp, & LLC are best for legal protection not tax savings.  the nice part is the corporation is a separate "entity" than you (the owner).  So if our delivery driver ever had an accident, the people suing would be limited to the assets of the company, rather than taking our house.  Naturally, if we hired someone with no license and history of DWI, all bets are off.  But the reason our little flower shop was a corporation was for protection.
 
As for the tax write-off ... they are designed to help you do business and keep people employed!  We had to match each employee's FICA to the government, what we could write off was gas to keep the truck going, rent, etc. and most of the stuff we paid to another business - like flowers.  Since they were making money on what they sold to us, shouldn't they pay taxes on their profits, rather than us paying taxes on our expenses?
 
Businesses also need to collect all the sales taxes, and in Maryland we have "property" tax for the things we owned like walk-in coolers to keep the flowers fresh (would you like the government to tax your fridge/freezer at home to keep your food cold?), computer to track accounts, etc..  Naturally, there is enough complexity that you need to pay for specialist (hire accountant, or book keeper, etc.) just to keep the paperwork straight, so in addition to paying the people to design flowers, there is the "overhead".
 
There is also an unemployment tax which companies need to pay based upon their payroll, and if you ever have a point where you need to lay someone off due to failing sales, that tax rate increases (just like your auto insurance after an accident).  Just when times get hard, you get to pay more.
 
 
HADZ (a.k.a. joe) 
 
"That's what a ship is, you know. It's not just a keel and hull and a deck and sails. That's what a ship needs. But what a ship is... is freedom." 
-- Captain Jack Sparrow 


----- Original Message ----
From: Brad Haslett <flybrad at gmail.com>
To: The Rhodes 22 mail list <rhodes22-list at rhodes22.org>
Sent: Sunday, November 12, 2006 5:35:42 AM
Subject: Re: [Rhodes22-list] Tax Advice?


Slim,

You cannot avoid taxes, you can only defer them.  For a sole proprietor with
no employees, an S corporation isn't worth the hassle.  Depending on how
expensive it is to set up in Minnesota, a Limited Liability Corporation,
(LLC) may offer you a few tax advantages, but not many for the extra expense
and hassle.  Whether S or LLC, all income and expense flow through you and
you are already eligible for the same expenses, ie, car, telephone,
computer, musical equipment, etc.  Either one would give you
*some*protection from liability, but you are the only employee you
have to worry
about throwing a beer bottle at a customer or running someone off the road,
and you probably already have insurance for that.  "Piercing the Corporate
Veil" is pretty easy to do with a company of one. Health insurance is damned
expensive for individuals and small companies.  When you find a solution,
let me know, I'm looking myself.

You're doing the right thing with your retirement accounts, just don't
forget, you're nearing the big five-O and the funding limits increase for
most retirement accounts.  What pleasure!

In case you get fed-up with paying taxes, do what a former co-worker of mine
did.  Google Vernie Kuglin.  Vernie and I were new hires together but she
retired recently.  She beat a criminal charge of not paying taxes (it is
easy to find 12 peers who hate the IRS) but nobody beats a civil case for
not paying taxes, nobody. I don't think her fifteen minutes of fame was
worth it.  Remember how Al Capone got busted.  The IRS got him for tax
evasion and threw him in jail in Memphis.

When I worked part-time for a CPA firm the motto at tax time was "nobody
goes to jail for taking a deduction, only for not declaring income."  Play
hardball with the IRS but pay your taxes!

Brad


On 11/12/06, Slim <salm at mn.rr.com> wrote:
>
> My company pays taxes.  I run a company of one.  I'm the chief, cook and
> bottle washer.  I file as a self-employed independent contractor and pay
> taxes every year.  I'm sure I could find a crooked accountant to figure
> out
> how to show a loss every year.  Am I being stupid not to?  Is it worth
> looking over your shoulder for the next 7 years?
>
> I could form a S-Corp and avoid some taxes and other liabilities and be
> eligible for group health but there's some up-front expense that I'm not
> sure I'm ready for.  I don't know.
>
> I invest in my SEP IRA (mutual funds) and also my ROTH IRA.
>
> Any advice?
>
> Slim
>
> On 11/11/06 9:28 PM, "Brad Haslett" <flybrad at gmail.com> wrote:
>
> > MJM,
> >
> > You are correct.  Companies don't pay taxes.  They build the cost of
> taxes
> > in to the cost of their goods and services and the consumer pays the
> taxes.
> > When companies distribute profits, the shareholders (who are the ones
> who
> > pay taxes to begin with) are taxed again.  It really is that simple.
> >
> > Brad
> >
> >
> > On 11/11/06, Michael Meltzer <mjm at michaelmeltzer.com> wrote:
> >>
> >> There is a simpler problem, the only people who will pay taxes will be
> >> people with w2 income, everyone else including the company will figure
> a
> >> way
> >> out of it. It really that simple
> >>
> >> -mjm
> >>
> >> -----Original Message-----
> >> From: rhodes22-list-bounces at rhodes22.org
> >> [mailto:rhodes22-list-bounces at rhodes22.org] On Behalf Of Philip
> >> Sent: Saturday, November 11, 2006 8:59 PM
> >> To: The Rhodes 22 mail list
> >> Subject: RE: [Rhodes22-list] Taxes.
> >>
> >> Bill,
> >>   Not distribution but re-distribution.  I don't like anyone taking
> from
> >> me
> >> to provide to others.  That should be charity.  I like to enjoy the
> fruits
> >> of my labors, and I resent others enjoying the fruits of my labors when
> >> they
> >> are not entitled to them.
> >>
> >> Philip
> >>
> >>
> >> -----Original Message-----
> >> From:   rhodes22-list-bounces at rhodes22.org
> >> [mailto:rhodes22-list-bounces at rhodes22.org]  On Behalf Of Bill Effros
> >> Sent:   Saturday, November 11, 2006 2:37 PM
> >> To:     The Rhodes 22 mail list
> >> Subject:        Re: [Rhodes22-list] Taxes.
> >>
> >> Philip,
> >>
> >> It's always a distribution of wealth issue.
> >>
> >> Bill Effros
> >>
> >> Philip wrote:
> >>> I don't mind paying my fair share and I don't care if it is going to
> the
> >>> Constitutionally authorized appropriations.  I resent paying when it
> >> becomes
> >>> a distribution of wealth issue.
> >>>
> >>> Philip
> >>>
> >>>
> >>>  -----Original Message-----
> >>> From:         rhodes22-list-bounces at rhodes22.org
> >>> [mailto:rhodes22-list-bounces at rhodes22.org]  On Behalf Of
> >>> R22RumRunner at aol.com
> >>> Sent: Friday, November 10, 2006 2:37 PM
> >>> To:   rhodes22-list at rhodes22.org
> >>> Subject:      [Rhodes22-list] Taxes.
> >>>
> >>> Brad,
> >>>
> >>> I am neither conservation or liberal. My wife swears I'm a closet
> >>> conservative, but I deny all.
> >>> I am glad to have the opportunity to pay taxes. As a citizen, I accept
> >> the
> >>> responsibility and make every effort to make my tax returns as
> accurate
> >> as
> >>> possible.
> >>>
> >>>
> >>> Rummy