The Ultimate Tax Shelter: Incorporating Your Business!



Posted: Tuesday, August 05, 2008

by
Horizon Star, Inc

Are you looking for a tax shelter? Incorporating your own business has many benefits in addition to providing you with tax savings. If you don't have a business entity, then you are not taking advantage of the tax write off list available to business owners. Having a business entity opens up a variety of doors to increase your tax savings, limit your personal liability, and even estate planning.

You can reduce your tax liability by increasing the number of business tax deductions that you take. Tax deductions are, without a doubt, one of the greatest ways to increase your IRS tax write offs. Taking your normal day-to-day business expenses and using them to lower your taxable income can greatly reduce how much money you owe Uncle Sam. However, in order to take a business tax deduction, your business needs to have a profit motive. The profit motive is covered in greater detail in Wealthy Tax Secrets.

Today, incorporating a business entity or forming a Limited Liability Company (LLC) can even be done online. For a nominal service charge you can have your very own tax shelter by incorporating your business or forming an LLC with either Legalzoom or Bizfilings.

However, before you form a business entity you need to know what the strengths and weaknesses of each entity are. Some will give you a larger list of tax deductions while others will be better for limiting your personal liability. The following is a brief overview of what entities are best suited for your needs. .

 If You Want To:

 Consider:

 Do Not Use:

 Deduct Business Losses On Personal Tax Return

 S Corporation, LLC, Sole Proprietorship, Partnership

 C Corporation

 Eliminate Double Taxation

 S Corporation, LLC, Sole Proprietorship, Partnership

 C Corporation

 Have Liability Protection

 C/S Corporation or LLC

 Sole Proprietorship or Partnership

 Hire Your Children

 LLC or Sole Proprietorship

 C/S Corporation or Partnership

 Limit Self-Employment Taxes
(Social Security/Medicare)

 C/S Corporation

 LLC, Sole Proprietorship, or Partnership

 Limit Record-Keeping and Filing Requirements

 Sole Proprietorship

 C/S Corporation, LLC, Partnership

 Lower Income Tax on Net Income Less Than $50,000

 C Corporation

 S Corporation, LLC, Sole Proprietorship, Partnership

 Lower Risk of IRS Audit

 C/S Corporation or Partnership

 LLC or Sole Proprietorship

 Maximize Business Income Accumulation

 S Corporation, LLC, Sole Proprietorship, Partnership

 C Corporation

 Maximize Disability Insurance Benefits

 C Corporation

 S Corporation, LLC, Sole Proprietorship, Partnership

 Maximize Fringe Benefits

 C Corporation

 S Corporation, LLC, Sole Proprietorship, Partnership

 Maximize Group Life Insurance Deductions

 C Corporation

 S Corporation, LLC, Sole Proprietorship, Partnership

 Maximize Retirement Benefits

 Any

 N/A

 Raise Additional Capital via Loans and/or Investors

 C Corporation

 S Corporation, LLC, Sole Proprietorship, Partnership

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