Posts Tagged ‘Family Business’

Is Your Business A Family Affair?

Wednesday, November 16th, 2016

Top Tax Savings Strategies For The Family-Run Business

Family Business- Ohio Tax Planning

Instead of chores, how about give your children a job to do in your family-run business. The money they earn can go to their college savings account and the savings you accumulate can be reinvested to help your company find future growth. Read on to learn more.

There’s a certain freedom associated with being self-employed, but there’s also a lot of responsibility … and expenses. Fortunately, the family that’s invested in the success of the business, and is willing to roll up their sleeves and get to work, may be able to secure some significant tax savings.

Marriage Has It’s Benefits

If you’re married, chances are good that your spouse is already doing helping out in some aspect of your business. So why not extend a formal job offer? While you may be hesitant to bring them aboard (officially), there are several key reasons why it pays to add your spouse to the payroll.

  • Retirement benefits – Once hired, federal taxes will begin to be withheld from your spouse’s paycheck. That means that they will start receiving Social Security credits toward retirement. This alone is a pretty great (when it comes to retirement – every little bit helps), but the retirement benefits of hiring your spouse don’t stop there. If your business already offers employees a retirement plan, those benefits can be extended to your spouse when they opt in to the plan as well. Furthermore, contributions your company makes to the plan are tax deductible – up to 25 percent of compensation or $49,000, whichever is less.
  • Health Insurance – Business owners everywhere continue to struggle with the affordability of health care. But those who do offer this benefit to their employees, might be able to secure some additional savings by opting to cover their spouse as an employee rather than as a dependent. Especially if you consider the fact that your company can deduct the premiums it pays for employee health coverage. Then you may want to ask your tax advisor if you are also eligible to receive the health care tax credit.
  • Life Insurance – Because they are employees of your business, your spouse is eligible for the same benefits as all your other employees. That includes life insurance. And those costs are deductible as business expenses as well.

All Hands On Deck

Raise your hand if you had to do chores as a kid. We all did. It taught us work ethic and the value of a dollar. These days, families that own their own businesses can go a step further. Instead of paying your son or daughter a few dollars to mow the lawn, how about hiring them as a grounds keeper for your business? These days giving your kids a job in your business isn’t just a huge help when it comes to managing the day-to-day responsibilities of the company, it can be advantageous from a tax perspective. Business owners who welcome their kids to the family workforce, may be able to:

  • Deduct their children’s salary from the business’s income as a business expense.
  • Avoid paying FICA tax on their children’s salary.
  • Shift a portion of business income from your tax bracket to your child’s to significantly reduce your taxable income.

But, in order to make this strategy work, you must be able to prove that your children are legitimate employees and that their work is necessary. And don’t forget to fill out all the proper forms that go along with hiring any new employee (W-4, U.S. Citizenship and Immigration Services Form I-9, Employment Eligibility Verification, etc.). It’s also wise to keep track of their work and the time they put in by maintaining a time sheet. Also, while it may be tempting to pay your kids top-dollar for answering phones or cleaning the office, the IRS is on the lookout for unreasonable compensation practices. Don’t pay your son or daughter more than what you would pay a stranger for doing the same job and pay them regularly, as you would with any other employee. Your child’s paycheck can then be directly deposited into an account in your child’s name.

TIP: Get more out of your child’s earnings by opening a Roth IRA or 529 College Savings Plan in your child’s name and direct deposit their wages into the account and watch it grow.

Start taking advantage of the various strategies available for family-run businesses. Email rea.news@reacpa.com or ted.klimczak@reacpa.com to find out how.

By Ted Klimczak (Medina office)

Check out these articles for more tax tips and insight:

5 Tax Deductions To Ease Your Business’s Tax Burden

How To Drive For Business And Save On Your Tax Bill

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Stop The Family Drama With A Buy-Sell Agreement

Thursday, October 8th, 2015
Take control of your future with a buy-sell agreement - Unsuitable on Rea Radio

You don’t know what the future holds, but if you don’t take steps to prepare for the unknown you are leaving your business and your family vulnerable. Click here to listen to How To Ruin Thanksgiving Dinner on Unsuitable on Rea Radio, a new finance and business management podcast.

It seems like when the holiday season comes around everybody does their best to put their best foot forward and to portray the image of “the flawless family.” From the turkey dinner on Thanksgiving, to the Christmas cards featuring happy, loving families – we do all we can just to make sure everything is … perfect.

Listen to the podcast: How To Ruin Thanksgiving Dinner

The holiday season is also notorious for other less-than-perfect qualities, such as family fights, holiday shopping stress and, ultimately, increased depression and anxiety.

Now imagine you are battling the normal holiday stressors while trying to manage a family business. And what if your business is in crisis mode and your life, the future of your family members and the sustainability of your company hangs in the balance?

When you own a business with family or friends you already run the risk of business matters spilling over into your personal affairs. But when you haven’t invested the time and resources needed to plan ahead, you are leaving your business and your family vulnerable. Take control of the future of your business and the general well-being of your family all year long by knowing the true value of your business and investing in a proper buy-sell agreement.

Click here to read the full article.

By Tim McDaniel, CPA/ABV, ASA, CBA (Dublin office)

Business Valuations - Ohio CPA firmLearn more about the importance of securing a custom business valuation and buy-sell agreement. Listen to the How To Ruin Thanksgiving Dinner” podcast on Unsuitable on Rea Radio at www.reacpa.com/podcast or on iTunes or SoundCloud.

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What Are 6 Things You Can Do To Improve The Health Of Your Business in 2014?

Monday, December 30th, 2013

Are you out of breath from the impact the economy had on your business during the last several years? Is it time to develop some New Year’s resolutions that will make a difference in your business? Adopting a new diet, jumping on the treadmill or committing to run a half marathon are common items on the “personal” resolution menu. However, is it time to add energy and resources to your resolutions in order to improve the health of your business?  (more…)

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How do you create a succession plan?

Wednesday, April 18th, 2012

One measure of great business leaders is that their businesses continue to thrive once they leave their positions.  Visionary leaders captain the ship today while making plans for someone else to take the helm tomorrow.  Proactive succession planning allows businesses to continue their smooth sailing long after the captain abandons ship. (more…)

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