Archives for February 2017

Starting Your Own Business?

February 28, 2017 by Frank

In our book “Empower Your Business to Reach Its Full Potential, Your Road Map to Planning and Executing a Successful Business”, we discuss the challenges and pitfalls entrepreneurs face when they attempt to start their own business without consulting with experienced professionals.

Those who believe that they can read a few articles on the Internet and become proficient enough to decide for themselves what type of business entity to choose are being penny wise/dollar foolish. Choosing the wrong entity can be very costly in terms of tax dollars, cash outlays, and time. Heck, we have even seen [Read more…] about Starting Your Own Business?

Is S Corporation Required to Pay Shareholder/Employee a Salary?

February 21, 2017 by Frank

Generally when an S Corporation has a shareholder/employee who owns at least two percent of the stock of the S Corporation, the S Corporation is required to pay that employee (and related parties) a reasonable salary. A reasonable salary is based on the facts and circumstances of the company, such as the number and types of services provided by this employee (such as personal services), services provided by other employees, how active the employee is, the number of hours worked, how other employees are compensated, and the profitability of the company to name just a few considerations.

There is one situation where the company is not required to W2 compensate this type of employee. If the shareholder/employee [Read more…] about Is S Corporation Required to Pay Shareholder/Employee a Salary?

Age-Weighted Profit Sharing Plan

February 14, 2017 by Frank

Business owners value their employees and want to reward them for their contributions to the business. One way of doing so is to provide a retirement plan for their employees.

As a business owner, they have more at risk than their employees in the success of the business. When designing a retirement plan, an age-weighted profit sharing plan may be attractive to the business owner.

First, what is a profit-sharing plan? A profit-sharing plan is [Read more…] about Age-Weighted Profit Sharing Plan

COLI-The ABCs of Company-Owned Life Insurance

February 7, 2017 by Frank

“Officer’s life insurance premiums” are not allowed as a deduction on a corporation’s tax returns. Why is this? Is this one of those unfair tax rules?

Well, when a corporation takes out a life insurance policy on one if its key employees — and the corporation is both the owner and beneficiary of the policy — the proceeds paid to the corporation upon the death of the employee are generally tax-exempt (I.R.C. §101). Because I.R.C. §101 serves to exclude life insurance proceeds from income, I.R.C. §264 prevents a second tax benefit by disallowing a deduction for any premiums paid on a policy on which the payor is the beneficiary. That way, the taxpayer doesn’t get a deduction for premiums AND tax-exempt proceeds when the policy is paid out.

The rules regarding COLI are complex. Did you know [Read more…] about COLI-The ABCs of Company-Owned Life Insurance