Guidant Financial Group Blog

Potential Tax Hikes Force People to Reconsider S or C Corp

Wednesday
Let the debates begin!

In President Obama's recently proposed budget, there is a future tax break coming for the middle class and the cuts, enacted on upper-income taxpayers under George W. will be allowed to expire at the end of 2011. Nothing has yet been finalized - but - it has started some pretty intense chatter.

In "To Avoid Tax, Set Up as a S-Corp or C-Corp?", BusinessWeek reported that most small business are structured as an S-corporation but more are considering a C-corp status due to worries about future tax hikes. The story reports that individuals currently taxed at 33% would see a 10% hike - to 36%. Thos at 35% would see a steeper increase to 39.6%. Because an S-corp passes income onto the business owner's personal tax return and inflates their personal earnings - even if they don't take it as salary.

Karen Klein reported she has "clients that are considering terminating their S-corp election, and we have some that were contemplating going from C-corp to S-corp, and they're revisiting their assumptions." In her article she also mentioned that "what we don't know is whether we'll have higher tax rates for corporations in the future. We may make a decision now based on today's rates but in the long term if corporate tax rates change then we could find out we've actually done something that will have a negative impact."

Their are many advantages, and disadvantages to both corporate entities. The only way to be sure which is the best for your business is to talk to your qualfied tax advisor.


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posted by Guidant Financial Group @ 12:19 AM 0 comments

Obama's Tax Breaks Could Mean Big Bucks for Small Biz

Thursday
Small business owners whose businesses performed at a loss in 2008 may be eligible to receive emergency refunds within weeks of President-elect Obama’s inauguration. According to a recent BusinessWeek article, business owners who can report a net operating loss (NOL) for the last year will be able to offset income from the business for the last five years instead of the standard two. This could qualify owners of formerly profitable businesses to receive substantial refunds. The Section 179 first-year expensing deduction limit is nearly doubling from $133,000 to $250,000, and these benefits combined could help a struggling business reinvigorate its operations within a few months.

This is great news for all business owners who have seen profits fall and credit tighten in the last year. The increased Section 179 deduction is also great for business and franchise owners who are just starting out. For some, of course, the refunds alone may not suffice to fully recapitalize a business. If that is the case, 401(k) small business financing may provide the additional funds to stabilize a business for better results in the New Year.


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posted by Guidant Financial Group @ 8:35 AM 2 comments
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