Closely-Held Service Companies

Since 1969, when we started practice, the small closely-held business needing advice of how to organize, what assets to own, what to lease, how to handle payroll, how to minimize taxes, what to do about self-employment taxes, how to deal with the home office, what returns have to filed, what accounting software to use, and a host of other questions represented the typical client. It still is. Only the issues have become more complex.

This type of client makes up the predominant part of our accounting practice. One or two owners working hard to develop a business that doesn’t require twelve hours a day to be successful, have a good income, and a good life style.

The decision about whether to incorporate is always at the forefront of business startup. Owners must decide for themselves, in counsel with an attorney, whether the advantages outweigh the costs. Let me give you a few examples.

1) A businessowner was ungoing divorce, was deeply in debt, and, as a sole proprietor, had significant tax liabilities. Upon our advice, he incorporated, lowered his take-home pay, resulting in lower child support and, initially, lower tax liabilities, enough to see him through a crisis.

2) Two partners decided to form an LLC as a entity vehicle for what they projected to be an extremely profitable venture. The immediate problem was significant liability for Medicare tax, which has no income ceiling as social security does. Upon our advice, they made the “S” election which was approved by the IRS.

3) A designer came to us from another accountant asking for preparation of her corporate tax return. Her retirement plan consisted of a SEP. Business suddenly took off, and upon our advice, she adopted a prototype 401(k) plan, which resulted in the deferral of a significant amount of income, both at the federal and state level (SEPs are not deductible against Massachusetts income).

Closely-held business corporations have opportunities to assist parents in funding college expenses. Because of our training, expertise, and knowledge about college planning (John has the CCPS designation), we are able to show clients how to maximize their corporate structures.

There are fringe benefits available to corporate employees not available to sole proprietors. We are able to show clients how to maximize fringe benefits.

For certain clients, minimizing self-employment taxes is important. We are able to show clients how to minimize self-employment taxes.

For these and many other reasons, our training, expertise, and experience with closely-held companies will mean savings and real client-driven added value.