S/A Shaw & associates How To Organize Your Business And Minimize Your Taxes Bradley V. Shaw C.P.A. Nathan R. Shaw C.P.A. Joshua B. Shaw MPACC Shaw & Associates P.C. 2317 N. Hill Field Road, Suite 101 Layton, UT 84041 (801)728-7070 Website: www.shawandassoc.net
Business Structure Examples of Business Entities: Sole Proprietor Partnership C- Corporation S- Corporation Limited Liability Company (L.L.C.)
PHASE ONE Escential Consultant Lead Consultant $0 to $1,000 in group sales per month Sole Proprietor File on Schedule C on personal tax return Meet with a CPA to discuss your new business Familiarize yourself with deductible expenses and develop tax strategies and goals for future Scentsy success * Sole Proprietor is the most audited form of entity!
PHASE TWO Lead Consultant Super-Star Consultant $1,000 to $6,000 in group sales per month Time to start considering Incorporating your business Profitability is the determining factor Maintain regular contact with CPA for tax advice Tax Plan Tax Plan Tax Plan!!
PHASE THREE Super-Star Consultant Super-Star Director $6,000 to $80,000 in group sales per month You should be incorporated for greatest tax savings Meet with CPA regularly for tax planning Payroll / W2 wage for business owner Retirement Planning
Business Structure Continued A. Liability Issues B. Tax Issues
Business Structure Liability Issues Entity Type Liability Protection Sole Proprietor NO Partnership NO C- Corporation YES S- Corporation YES L.L.C. YES
MUST ACT LIKE A CORPORATION!! 1. Separate business bank account 2. Maintain corporate records 3. Do Payroll
Business Structure Tax Issues Sole Proprietorship Partnership or L.L.C. S- Corp. Profit from Business $50,000 $50,000 Federal Tax (15%) 7,500 7,500 State Tax (5%) 2,500 2,500 Self Employment Tax (15.3%) 7,650 3,825 Total Tax $17,650 $13,825 TAX SAVINGS $3,825 Tax Savings Assuming $100,00 Profit $7,650
When to Incorporate? 1. Depends on profit from business. 2. Planning is the key Stay in contact with CPA. 3. Corporation cannot be back-dated. 4. Better to incorporate earlier rather than later in order to save tax. 5. Sole Proprietor Most Audited Entity
PAYROLL If incorporated, payroll is a requirement (Form W2) --We will consult with you on a salary amount 2 options for completing payroll: 1. Do it yourself on Q.B. can be difficult 2. Hire outside payroll company we recommend Paychex (fliers provided)
BOOKKEEPING GROSS INCOME --- EXPENSES NET INCOME
GROSS INCOME Commissions Retail Sales Royalties Bonuses
EXPENSES (1) ALL : 1. Ordinary 2. Necessary 3. Reasonable
EXPENSES (2) 100% Deductible Cost of Products Advertising Dues Office Supplies Sales Tax Down-line Gifts Hostess Fees Postage / Shipping Printing Incentives for team members Conventions, Conferences & Booths Scentsy Parties
EXPENSES (3) Partial Deductibility Cell Phone (75% deductible) Meals Clients (50% deductible, write on back of receipts) -- Personal meals by oneself are not deductible on tax return Travel Business Related 100% deductible Internet 50% deductible if home usage -- Higher percentage if a dedicated line Home Office - % of Utilities based on square feet (Usually not a big deduction!)
Auto Expenses Auto Expenses Auto deduction is actual expenses or mileage, whichever is greater. 2011 mileage rate: Jan. 1 June 30 = 51 cents per mile July 1 Dec. 31 = 55.5 cents per mile Mileage Log is most efficient way to track mileage (Log example on website)
EXPENSES (4) NON-DEDUCTIBLE Life Insurance Dry Cleaning and Laundry (Job must require a suit) Fines and Penalties Some Bank Charges (Returned Checks) Personal Expenses (Meals, Groceries, Mortgage)
BOOKKEEPING We recommend Quickbooks Pro 1. Simple 2. Inexpensive 3. User Friendly Consultants in our Office 1. On-site Training 2. Remote Training 3. On-going Assistance & Help
WEBSITE Website Located at: www.shawandassoc.net Great Resource for Scentsy Consultants: Scentsy Links, Mileage Logs, Tax Tables
Section 179 Depreciation Deduction Eligible Property for the Section 179 Deduction: 1. Machinery & Equipment 2. Furniture & Fixtures 3. Trucks 4. Off-the-Shelf Computer Software
Section 179 Deduction Continued 5. Sport Utility Vehicle Deduction A. If an SUV with a gross vehicle weight of more than 6,000 lbs. is purchased for business use, $25,000 of its cost can be immediately deducted, with the remainder deducted through normal depreciation deductions.
Family Goals and Priorities Emergency Fund Education Retirement Big House Nice Vacations Write them down. Review them periodically. Must lead a balanced life. Must distinguish between wants and needs. You need food. You want Prime Rib!
Priority #1 Family Emergency Fund Why an Emergency Fund? 1. Loss of Job 2. Sickness 3. Disability 4. Death of a family member 5. Natural Disaster
Time and Interest to pay off a $4,000 credit card balance Interest Rate Paying $100 every month Interest Paid 5.9% 45 months $465 7.9 47 months 648 9.9 49 months 874 12.9 53 months 1,257 15.9 58 months 1,736 18.9 63 months 2,362
Mortgage Comparison 15 years vs. 30 years Mortgage 15 Year Mortgage 30 Year Loan Amount $200,000 $200,000 Interest Rate 4.5% 5.0% Monthly Payment $1,529.99 $1,073.64 Total Interest $75,397 $186,513 Total Payments $275,397 $386,513 15 year term save you $111,116, but costs an additional $456 per month
Term Life Insurance Average Monthly Costs Age $100,000 $300,000 $500,000 $1,000,000 35 16.00 27.00 38.00 65.00 40 19.00 34.00 49.00 86.00 45 25.00 48.00 71.00 129.00 50 33.00 69.00 105.00 197.00 55 43.00 97.00 152.00 288.00
Rules of Thumb to Prepare for Retirement: 1. Time is your greatest asset start saving early 2. Try saving at least 15% of your gross salary for retirement 3. Participate in company sponsored retirement plans save as much as you can no such thing as putting away too much for retirement 4. Pay off your mortgage prior to retirement 5. Many of us will spend more years in retirement than we did working
How Much Do You Need For Retirement? Here s the daunting amount of money you should have saved for your retirement at various stages: Assume Earnings of $100,000 At Age Multiply income by: Should have saved: 45 4.1 $410,000 50 6.1 610,000 55 8.5 850,000 60 11.4 1,140,000 65 15.0 1,500,000 Source: Charles Farrell, Dorman Farrell, L.L.C., Money Magazine
What To Look For In A CPA FIRM 1. Do they know your business? 2. Do they plan with you or just prepare your tax return? 3. Response Time: Phone Calls or Emails? 4. What costs are involved? 5. Due Diligence -- Ask around!
Shaw & Associates, P.C. Why Use Us? 1. We know Scentsy Look for the Scentsy link on our website for specific Scentsy advice. 2. Because we know Scensty Usually less expensive than other CPA firms. 3. We specialize in tax planning & business organization. 4. Phone calls & emails returned promptly. 5. You will receive more personal attention. We know all of our clients. 6. Out of State No Problem
S/A Shaw & Associates Contact Information / Notes (801)-728-7070 www.shawandassoc.net