As a former Chief Counsel and CFO, I often act as a one-stop source of tax, legal and estate advice for my small business clients. Many tax newsletters this time of year are obsessed with year-end tax planning. I will try to offer broader topics.
This time of year I am helping my small business clients with complex contracts, like business purchases and sales, buy-sell agreements, bonus and option contracts. The holiday season is also a great time to hire your children. Your business will benefit from the deduction. The kids’ earnings can be contributed to a Roth IRA to give them tax free savings.
Two of my clients are planning on selling their businesses and retiring. If you have a corporation such a sale can result in double taxation. My combined contract and tax skills are essential to minimize tax liability in this case.
Another client has an old family business but has no agreements to control what happens if one dies or decides to pull out. This situation can be like a business divorce! Feelings can run high and law suits are not uncommon. I have the right agreement that solves the problems.
Another corporate client has family members who are children of the stockholders and who would like to own part of the business. Having experienced this situation many times in the past, I suggested a bonus and option agreement that would provide bonuses to the buyers and give them a chance to buy the stock at a fair price.
Taxwise: Hire your children over Christmas break when they have some time and save $1,000’s of tax dollars. Hint: Young folks are good with technology, so you can justify a fair salary for their services. If you do it properly you can pay your child up to $6,300 and you will save yourself $1,500 to $2,300 in federal income taxes. The child will pay no taxes if that is his only income.Top it off by contributing the child’s 2016 earnings to a Roth IRA up to $5,500. Advantages? Contributions can be pulled out free of tax at any time and up to $10,000 of earnings can be taken out tax-free by the child to buy a first home.
Contact me for more information about these strategies.
My Advice: Don’t allow the Holidays to distract you from things to do as we approach year end. Take advantage of my *Free 1/2 hour consultation* to see if I can help you.