Bring the decision while it can still change.
Forming a company, adding an owner, or changing how you take money out of the business all carry tax consequences. Once the year ends, most of those consequences are already set, and the return can only report them.
A planning conversation works best with the prior return, year-to-date results, and a clear description of what you are considering.
Three planning conversations business owners bring.
Entity choice and elections
Compare how a sole proprietorship, partnership, S corporation, or C corporation would be taxed on your facts before forming or changing an entity. An S corporation election is made on Form 2553 and must be signed by all shareholders.
How owners are paid
Plan wages, distributions, and draws together. An S corporation must pay reasonable compensation to a shareholder-employee for services before non-wage distributions are made.
Estimated taxes and cash flow
Set the year's tax payments against the business's cash, so quarterly estimates and the final balance are planned for rather than discovered at filing time.
Entity choice changes more than the tax return.
A C corporation is taxed as a separate entity, and profits distributed as dividends are taxed again to shareholders. Partnerships and S corporations generally pass income through to their owners, who report it on personal returns. The IRS S corporation guidance explains the election and how shareholders report.
Payroll, administrative cost, ownership plans, and state rules also matter. Legal formation questions may need an attorney, and the tax analysis should be coordinated with that advice rather than made in isolation.
Plan the year's tax payments with the business's cash.
Sole proprietors, partners, and S corporation shareholders generally make estimated tax payments when they expect to owe above the IRS threshold, and corporations have their own estimated-payment rules. The IRS estimated-tax guidance sets out who must pay.
Timing matters as well as the total. A strong quarter, a large equipment purchase, or a change in owner pay can each change what should be set aside, and planning during the year leaves room to adjust.
What planning does and does not include.
Planning explains the options, the assumptions behind them, and what could change the answer. We do not present tax savings or a particular outcome as guaranteed.
Bookkeeping, payroll processing, and legal entity formation are separate from tax planning and are not included unless the engagement says so. When the planning leads to a filing, the business tax return is its own piece of work.
COMMON QUESTIONS
Questions you may have.
Should my business be an S corporation?
It depends on your profit, how you pay yourself, the cost of running payroll, and your plans for the business. A planning conversation compares the options on your facts. No single answer fits every business.
Can you help me plan quarterly estimated payments?
Yes. Estimated-tax planning is part of business tax planning. Bring year-to-date results and the prior return through the agreed document process.
Is business consulting the same as bookkeeping?
No. Consulting covers the tax side of business decisions. Bookkeeping and payroll are separate services and are not included in a planning engagement.
Can you guarantee tax savings?
No. Planning explains your options and their likely tax effects on your facts. A particular result cannot be guaranteed.