When John realized that there was an opportunity to find an accounting firm that could take on key financial functions and, most important, discover ways to reduce its tax burden.
Sigma Accountants was selected to replace the outgoing accountant, and the first task was to elect to file Federal tax returns as an S Corporation. A good rule of thumb is that if you have more than $65,000 in net income, you should begin discussing the benefits of an S-Corporation with your CPA.
This simple change offered several important tax benefits, notably the reduction of onerous self-employment taxes. We helped him determine how much he should be re-investing into the business versus saving in a retirement plan. In the first year, this client worked with us his tax bill was cut by 33%. We expect similar results ongoing.
- We conducted a detailed analysis to understand John’s business and personal goals and exactly what he wanted his business and personal assets to do for him and his family
- We fully automated his business accounting and administration through a cloud accounting software that allows John to keep an eye on his business cash flow, create and track invoices and pay himself and funds into retirement – with the click of a button!
- John’s S-Corp election allows him to pay himself and save self-employment taxes, fund retirement, lower his marginal tax rates and saves him 33% in taxation per year
- By establishing a separate operating entity, if his business was successfully sued, he could wind the operating entity down and establish a new one – keeping the business asset completely protected
- With his business and personal assets all held separately, we created a firewall between his personal and business assets to ensure that his assets would be out of reach from business or personal creditors
As the practice is growing and scaling up, we are continuously working with John on more efficient billing and better cash flow. Using LivePlan method, John is able to predict profitability 90 days in to the future with historical data in an easy to use, reportable format