Considering Starting a New Business?
An overview for considerations before starting a new business dealing with the myriad of taxes involved. Also highlight importantce of knowing about industry segmenting and the IRS MSSP Programs
San Diego, CA (PRWEB) January 6, 2004
For nearly twenty-five years now, there has been a steady and growing trend toward self employment across the United States according to return filing information published by the IRS.
While this trend appears to be an overall positive force in our economy, it is worth noting that if you are considering starting your own business, there is one area of the business plan where special attention should be given to ensure a more successful opportunity. Taxes continue to be a significant area for consideration of those starting their own business. With business highlights featured in major articles such as “Franchise Fever” – (Wall Street Journal December 15, 2003); the entrepreneurs entering the market today are faced with far more complex tax issues than say ten years ago.
Having a game plan for taxes is essential for any business, especially one that is a new start up. Yet, very often more than not, taxes are not even given modest consideration until after the business has begun, and that first tax return is ready to file, only to then find out that there is yet another business expense to pay; Uncle Sam.
Not one business plan, nor franchise model has within it a comprehensive tax model to teach the new business owner or the tax professional they work with, how to manage and plan around the myriad of tax issues that may affect how profitable the business will be. So here are some considerations in taxation if one is considering a new business or franchise opportunity.
First, know all of the tax issues of that business. Know these by the Industry Type of business that is being considered. This information can be invaluable for a new business owner in avoiding so many of the problems we see when business owners ignore or do not understand how to plan around these tax traps. (Go to www. IRS. gov Look at Keyword MSSP for IRS Guides)
Second, interview tax professionals who have a sound understanding of business taxes. They should be familiar with the type of business that is being considered either as a franchise or a new start up or even a Home Based Business. Just because one prepares tax returns does not mean that they may have all of the qualifications necessary to provide guidance and advice about these many complex tax issues.
Third, and perhaps most important, understand and know why selecting the type of entity is crucial in current and future success of the business. The market is replete with seminars on “How-To” form your own LLC, and the Internet provides unlimited services that will form your corporation in Nevada for as low as $39.00, yet none of these options has with them a sound tax basis for the selection of the entity type or the state in which it will operate. Nevada corporations work well if you are in Nevada, but do little to help you if you are in California, except say a tax audit with many problems. (FTB Enforcement Advisory – Summer 2003)
Business Segmenting has become the new Buzz Word in the field of taxation. IRS through its MSSP Program (Market Segment Specialization Papers) now reviews all business based upon the type of business industry it may be. The chances may be higher for an IRS audit more because of the type of business than the activity of the business. Most tax professionals do very little beyond the typical twenty-hours per year in Continued Education (CE) to keep up with the vast number of changes that take place everyday at IRS, let alone the state or local taxes.
Finally, do not under value the need to talk with a good business attorney. One who is able to work with a tax professional qualified in specific business segments, and understands from a tax perspective, why an LLC may not be as good a plan as say perhaps an S-Corporation. The value of these two advisors can make all the difference in the world as to your future success and how much profit you are able to retain. Avoid the temptation to “cut corners” in costs for advice that is essential and valuable in ensuring your prolonged success. Making a substantial investment should also include thought of how well you plan to protect that investment, now and in the years ahead.
Tax Smart America developed a complete Industry Segment Tax Management System™ for virtually every type of business and franchise model in the market place. It licenses its intellectual property to tax professionals on a national basis and has proven to be an industry leader with this Business Method Patent Pending process. (See www. TaxSmartAmerica. Biz for location nearest you)
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