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Many business owners are usually faced with deciding whether to incorporate as a Limited Liability Company (LLC) or S Corporation (S Corp) due to the nature of their business, ownership, employees etc. It’s advisable to contact an accountant to help you with making the right choice depending on your organization’s situation. We however have a few pointers here to help you understand how they both work to help you make an informed decision.
Protections
LLC and S Corporations both have limited liability protections for their owners. Owning a business as a sole proprietor gives an opportunity for business creditors to reach your personal assets that do not have anything to do with your business. As an LLC or S Corporation, your business is a separate entity, responsible for its debts, liabilities and obligations.
Pass-Through Taxation
S Corps and LLC’s both offer their owners pass-through taxation with federal income taxes. This means the income and losses of the business are not taxed at the company level, but passed through to the owners to be reported on their individual tax returns. This avoids “double taxation” which is typical for C Corporations, since the corporations and shareholders are taxed at the company level.
LLC Advantages
There’s some additional flexibility when it comes to managing an LLC. S Corps and C Corps have corporation laws that have more guidelines regarding the management of the company compared to LLC’s. LLC’s have more flexibility to split and allocate financial interests among its members, S Corp’s profits however must usually be allocated based on ownership percentage. S Corporations can only have certain types of shareholders and are usually restricted to having less than 100 shareholders. Violating these rules can lead to many unwanted issues.
LLC’s can however achieve pass-through taxation status without those restrictions and offer more income tax choices in how your company is taxed. There’s an option to have your LLC taxed as a C Corp or S Corp, but we’d recommend discussing with your accountant.
S Corp Advantages
S Corporations offer the options to receive both salary and dividend, which could keep your taxes lower. LLC owners however pay self employment taxes, which can result in higher taxes. S Corps are also easy to convert into C Corps, with the process simply involving the filling of a form with the IRS. LLC’s on the other hand have a more complex process to convert into C Corp. S Corps typically also get outside funding more than LLC’s, as some investors and banks prefer to invest in corporations over LLC’s.
Summary
LLC’s and S Corporations both have their advantages, you may prefer to have more flexibility in running the company and allocating profits as you wish, which would lead to you to incorporate as a LLC. Contrarily, you might want earnings distributed proportionately to members, prefer to earn a salary instead of self-employment income and plan to seek funding later on. This would lead you to incorporate as an S Corporation.
The best way to determine what best suits you is to talk to an accountant like one of our professionals at Motl Accounting.
Payroll, Small Business
Managing Your Employees After the Pandemic
The COVID-19 crisis led to many changes in how employees work. Employees had to adjust to new routines and organizations had to make adjustments by providing access to work remotely. With normalcy setting in and the return of workers to physical offices, this could be a great time to revisit how to manage your team as they return to their work spaces. Meeting with your human resources and payroll providers to make adjustments that will keep your company and employees safe is advisable. We have a few tips here to consider when it comes to managing your human resources for positive results.
Revisit the Employee Handbook
The employee handbook is to have policies and procedures to help defend you from lawsuits. Ask an attorney to review your handbook to ensure it meets the times and update it as needed. Roll it out through a series of training sessions and have your employees (old and new hires) sign a statement acknowledging their understanding of the updated handbook.
Revisit the Office Setup
The pandemic led to a new awareness of being extra cautious and safe. Employees will want to feel safe at work and how your office is organized could make a difference. Consider having more space between staff desks and cubes to make everyone feel comfortable. You can also ask your employees for input on what their preferences are and accommodate them based on company policies and resources.
Be Supportive
Everybody deserves fair and equal treatment at the workplace and supporting your employees in this manner is encouraged. After a tumultuous year, providing the environment and flexibility that supports all manner of employees can make a difference in your business outcomes and in the lives of your staff. Having guidelines and policies that ensure fairness to all your employees should provide them with the peace of mind to carry out their duties effectively. You can also refer to the CDC’s guidelines on general business questions for COVID-19
Summary
As a human resource and payroll company, ensuring our clients are safe with the right information and tools is a main objective. It is important that business owners have the right answers to questions to keep them compliant and that’s where we make a difference.
Contact one of our Payroll Rockstars at 847-426-2100 to learn how we assist many businesses in the Chicagoland area with their payroll and human resources needs. We’d be happy to assist you and your staff with managing your payroll and keeping you compliant.
Accountant, Accounting, International Taxation
For those living and working overseas in a different country, taxation is a different ball game that requires experts who are skilled in international tax planning. The rules and regulations are different and knowing what is required to be in compliance with local and international laws can be daunting. Many taxpayers do not realize most US citizens and residents abroad must report their foreign income and foreign bank accounts. Many are not also aware that you can still receive deductions you are eligible for despite not living in the US. Mainly important to know is that all income from abroad is taxable and must be reported along with certain financial accounts. With this in mind, we have gathered a few helpful tips you would want to consider when it comes to international taxation.
Understand Tax Obligations of Work Country and Home Country
Some countries don’t tax their citizens living abroad, the United States however does, so it’s important to know if you are to be paying taxes to the country you work in, in addition to the US. There are some instances where individuals living abroad can claim credit for taxes paid overseas and this can help with not being double taxed.
Understand Laws and Treaties
Knowing the treaties, pacts and trade laws between both the US and country you work in is important. A trade law, sanction or tariff imposed or removed can have effects on how the laws intersect and how international tax treaties are followed. If you are looking to mitigate double taxation, there are avenues like Tax Treaty Relief, Foreign Earned Income Exclusion, Foreign Housing Benefit and Foreign Tax Credit. An experienced accountant in international taxation will be able to assist using some of these avenues.
Family and Lifestyle Dynamics
Are you married to a non citizen, did you recently purchase a home abroad or did your child just move abroad for the foreseeable future? These are all family and lifestyle dynamics that will be factored in when it comes to your taxes. For example, your child residing abroad permanently may qualify for the US foreign earned income exclusion and if you own a home abroad, you may be allowed to exclude some foreign housing costs from taxable income. However the foreign country your child lives in may impose a tax on the money you send him as a gift and the number of days you spend in your foreign home can play into how you are taxed.
In Conclusion
Many US based families find themselves in international work or living related situations which automatically affects how they are taxed. Having international tax experts like we do at Motl Accounting in the United States can provide you the peace of mind you want when it comes to your taxes. We help United States citizens and residents earning global income and/or living abroad file their personal income taxes and properly report their foreign bank and financial accounts.
Through the IRS “streamlined compliance program”, we’ll assist you in creating a safe-haven to catch up on your delinquent income tax filing, and non-reporting of your foreign bank and financial accounts (FBARS), without the heavy penalties and fines. We apply appropriate foreign tax credits and foreign earned income exclusions, possibly mitigating any taxes owed and ensuring you are in compliance with the US law by filing all the necessary forms and returns for taxpayers earning foreign income.
If you’ve found yourself in a situation that warrants international taxation or you are looking to file your FBAR with a skilled agent, we can assist. Contact our West Dundee office in Illinois at (+1) +847-426-2100 or send us a message on our Website or Facebook Page.
Accountant, Accounting, CPA, International Taxation, Taxes
Prepare to file your taxes in 2021 with these in mind!
Many businesses and families went through unexpected changes in 2020. The effects of the pandemic upended financial plans, forecasts, family plans, business goals and much more. This undoubtedly will have an impact when filing your 2020 taxes due to changes in the tax code for 2021. With COVID-19 came stimulus checks, programs like the Paycheck Protection Program (PPP), Pandemic Unemployment Assistance (PUA) and more depending on your business or personal need. We’ve been assisting businesses and families with their accounting and tax needs through the pandemic and will provide you with some tips to prepare you for filing your taxes this year.
Organize Records and Documents
For many, the main hurdle is getting documentation together. It’s important to have all your documentation in order to have a seamless filing experience. Keep all the tax documents that start coming in the mail early January in a folder and do not throw out any tax document that may look irrelevant. Many tax documents can also be downloaded online depending on the provider of the documents in case you can’t locate them. For example, many financial institutions provide tax documentation that can be viewed and downloaded when you access your account.
Review and Itemize Transactions for your Business
Whether you are self-employed, have a side business or own a home, you’ll need to ensure your transactions are correctly documented to claim certain deductions. The pandemic led to many working from home and you may be entitled to write-offs as a result. If you use a software like QuickBooks or use a spreadsheet for your records, take the time to review the transactions and put them in their respective categories. This will help your tax preparation process greatly. The benefits of having an accountant who assists with monthly bookkeeping is advantageous, as the monthly management of your books throughout the year keeps your transactions correctly labeled. This prepares you better for tax season and makes things easier for you and whoever is assisting with filing your taxes.
Note Life-Changing Events
Many life-changing events happen year over year, but have been commonly happening since the beginning of the pandemic. Changes like getting married, getting a divorce, a death in the family or retirement may qualify you for tax breaks. Your accountant or tax preparer should be aware of any life-changing event so they can help determine which tax breaks you qualify for based on how your circumstances changed in 2020.
Here are a few things to consider to help prepare for filing your 2020 taxes. Having an experienced tax preparation service can be helpful due to the changes in the tax code. Finding the right tax forms or knowing what to fill out due to the changes caused by the pandemic can be confusing. It’s advisable in these uncertain times to consult with an experienced accountant or CPA to ensure you are getting the most out of your taxes, while being compliant under the current laws.
Motl Accounting can handle the most complex returns providing you the peace of mind you would want through the experience. If you are looking to prepare your taxes, you can talk to a tax professional at our West Dundee location to get your questions answered and your taxes filed properly. Contact us at 847-426-2100 or send us message via our Facebook Page to get started today.
Accountant, Accounting, Bookkeeping, Business Expenses
When it comes to running a business, it’s important to keep your personal and business finances separated. This reduces accounting and tax problems and makes it much easier to manage your accounting books. Running a business already takes a great deal of effort, so it helps much to not have additional stress by managing your finances with bookkeeping tools and experts. We understand how important it is to properly manage your finances and the peace of mind that comes with it. We have helped over a hundred businesses with accounting and bookkeeping in the Chicagoland area and have gathered some reasons as to why you should separate personal and business finances to have a better understanding.
First off, you will want to ensure that your business is incorporated. Whether you choose to present it as an LLC, C Corp, or S Corp, you will want to ensure that it’s established with the right structure. By establishing a separate legal entity for your business, you will be able to protect your personal assets from your business debts, losses and lawsuits.
By opening business debit or credit cards, you won’t have to use your personal accounts for business transactions, and it’s the easiest way to keep your personal and business finances separate. In addition, a business credit card can help you build stronger business credit scores and could even boost your borrowing power which could help you qualify for business loans with lower interest rates.
- Open a business checking account
In addition to credit cards, you also want to open a business checking account and only make purchases for your business through it. Doing so let’s you have a clear and complete picture of your expenditures, which is ideal for when tax time rolls around as all you will have to do is review your statements.
- Create a salary for yourself
Seeing as you are the boss of your business, you will want to make it official. So, pay yourself. By creating a salary for yourself, you can write checks from your business checking account which can then be deposited into your personal account. This way, you can easily keep track of your payroll finances and ensure that your salary is being professionally handled as it should be.
One of the most efficient ways to keep your personal and business expenses separate is by keeping your physical receipts. So pull out those old-fashioned folders and place your receipts within them or upload them digitally. This will help with audits if the IRS ever comes knocking on your door, you can feel confident that you will be prepared.
- Track your shared expenses
As a business owner, it’s important to keep in mind that many of your business expenses are tax deductible and you will most likely have some expenses to write off! As a result, when you make purchases you will want to ensure that they are separate from your personal ones, which can be done by using your business debit or credit cards. Not only will separating your expenses make things easier for your accountant come tax time, but you will also be protecting yourself by keeping a financial record and continuing to keep receipts.
- Using personal items for business purposes
When it comes to your business, any expenditure that you can legally write off should be written off to save you money when tax time comes around. By working with a tax advisor, you can determine what’s deductible as well as how to keep the right records.
Properly managing your business finances is certainly of importance! These are just a few helpful ways to manage them throughout the year. Hopefully, you now have a better understanding of the complexities that are involved with running a business and managing your books. Working with an accountant can help with your bookkeeping, payroll and taxes and therefore make life and work much easier for you. Looking for an accounting solution that’ll provide you with peace of mind when it comes to your books? Get in touch with us here at Motl Accounting as we would be ready to assist. Our staff at our West Dundee, IL office assist many small to medium sized businesses and we look forward to assisting you.
