Michael Fussell, principal attorney at Tax Law Associates, LLC
Business Growth MAP Alliance, May 17, 2017
Today’s small business owners have to make many tough decisions. And whether they realize it at the time or not, these decisions often have tax implications. That’s why understanding basic tax choices is important for running a successful business, even if you choose to hire an accountant or tax attorney to handle the fine print.
Michael Fussell, principal attorney at Tax Law Associates, urges business owners to ask the question “Is your company structure impacting your bottom line?” Fussell told listeners at the May MAP Alliance forum that being able to identify potential advantages and traps early on can serve a business well into the future. Business owners don’t need to become tax experts to get ahead, of course, but a working knowledge of the tax system is helpful.
Fussell recommended planning in three key areas:
1. Entity Structure
Fundamental decisions need to be made about the type of entity one declares. Choosing between a sole proprietor, a partnership, a limited liability company (LLC) or a corporation can mean significant tax advantages or consequences. Fussell suggested looking into structuring under more than one entity, so long as it has economic substance for the business.
2. Asset Protection
Protecting one’s assets is essential. Turning a profit isn’t enough. Business owners need protection against claims and lawsuits too. While businesses can take advantage of “entity structuring” by using separate entities to protect assets, Fussell warned there is a tradeoff: Taxes and everything else become more complicated. Effective planning can help prevent potential legal attacks before they arise.
3. Succession Planning
A successful business needs to survive past its founder. It’s imperative to decide early on what will happen next. Knowing where the company is headed in the future will help guide business decisions in the present. Whether a company hopes to sell or hand down to the next generation, a solid succession plan will ease the transition.
With the right plan in place, handling business taxes doesn’t have to be stressful or overwhelming. Understanding the basics can save time and money. When in doubt, solicit advice from a professional. For those looking for the easy way, Fussell offered one last piece of advice: “If something sounds too good to be true, it probably is. Get more than one opinion.”
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