Separating Business and Assets: Tax Savings and Liability Protection
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A important business liability protection strategy is to divide your business assets by placing your business in one entity and your equipment and/or building in other entities.
To help you understand better, I'll use an example. One of our clients owned a pest control business. They had been operating for many years. The business had two locations in two different counties. They put each location in a separate corporation . Each building was placed a separate LLCs. Their trucks and spray equipment were put in yet another separate LLC. Doesn't that seem a bit much? Just think of all the bookkeeping and checking accounts and tax returns!
One day one of their employees made a mistake while mixing the chemicals and a little girl got sick. Luckily she fully recovered, but the parents were angry and decided to sue our client's company. The company had a perfect reputation and felt bad about the error and wanted to be fair to this customer.
However, the parents had dollar signs in their eyes . To keep the story short, because they had strategically placed their assets in separate entities , the sue happy parents were only able to create a lawsuit against one of the corporations . They received compensation for their daughter's illness, but were not able to take everything the company owns and the company was able to recover—with extra precautions in place, of course. The moral of the story is that separating your assets gives you the opportunity to do the right thing without loosing everything .
Separating your business and assets can not only offer liability protection but there can be some tax savings as well. For example, if your building and business are in separate LLCs, you can use your business's income to pay rent to your building LLC. By doing this you can avoid paying Social Security and Medicare taxes because rental income is taxed differently than business income.
There are several tax deductions that you are probably not taking advantage of. There are even some tax deductions that your tax preparer may be missing. Visit http://avoidbeingaudited.com to learn about a 12 CD set that will help you discover how to utilize this tax strategy of separating your assets as well as many other tax saving secrets. |
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Author Resource:-
The team members at Soulence Tax and Accounting are experts when it comes to separating business assets LLCs and S Corps. To discover more about this and other tax saving options available to you, visit this website http://avoidbeingaudited.com.
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By :
Jessie Stone
Submitted
2011-01-26 19:55:47 |
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