How To Organize Your How To Organize Your Business And Minimize Business And Minimize

Your TaxesYour TaxesBradley V. Shaw C.P.A.Bradley V. Shaw C.P.A.Nathan R. Shaw C.P.A.Nathan R. Shaw C.P.A.

Shaw & Associates P.C.Shaw & Associates P.C.2317 N. Hill Field Road, Suite 1012317 N. Hill Field Road, Suite 101

Layton, UT 84041Layton, UT 84041(801)728-7070(801)728-7070

Website: www.shawandassoc.netWebsite: www.shawandassoc.net

Business StructureBusiness Structure

Examples of Business Entities:Examples of Business Entities:

Sole ProprietorSole Proprietor PartnershipPartnership C- CorporationC- Corporation S- CorporationS- Corporation Limited Liability Company (L.L.C.)Limited Liability Company (L.L.C.)

Your Scentsy JourneyYour Scentsy Journey Escential ConsultantEscential Consultant

Certified ConsultantCertified Consultant PHASE ONEPHASE ONE

Lead ConsultantLead Consultant

Star ConsultantStar Consultant PHASE TWOPHASE TWO

Super-Star ConsultantSuper-Star Consultant

DirectorDirector

Star DirectorStar Director PHASE THREEPHASE THREE

Super-Star DirectorSuper-Star Director

PHASE ONEPHASE ONEEscential Consultant – Lead Escential Consultant – Lead

ConsultantConsultant$0 to $1,000 in group sales per month$0 to $1,000 in group sales per month

Sole ProprietorSole Proprietor File on Schedule C on personal tax returnFile on Schedule C on personal tax return Meet with a CPA to discuss your new businessMeet with a CPA to discuss your new business Familiarize yourself with deductible expensesFamiliarize yourself with deductible expenses Develop tax strategies and goals for future Develop tax strategies and goals for future

Scentsy successScentsy success

* Sole Proprietor is the most audited form of entity!* Sole Proprietor is the most audited form of entity!

PHASE TWOPHASE TWOLead Consultant – Super-Star Lead Consultant – Super-Star

ConsultantConsultant

$1,000 to $6,000 in group sales per month$1,000 to $6,000 in group sales per month

Time to start considering Incorporating your Time to start considering Incorporating your businessbusiness

Profitability is the determining factorProfitability is the determining factor Maintain regular contact with CPA for tax adviceMaintain regular contact with CPA for tax advice Tax Plan – Tax Plan – Tax Plan!!Tax Plan – Tax Plan – Tax Plan!!

PHASE THREEPHASE THREESuper-Star Consultant – Super-Star Super-Star Consultant – Super-Star

DirectorDirector

$6,000 to $80,000 in group sales per month$6,000 to $80,000 in group sales per month

You should be incorporated for greatest tax You should be incorporated for greatest tax savingssavings

Meet with CPA regularly for tax planningMeet with CPA regularly for tax planning Payroll / W2 wage for business ownerPayroll / W2 wage for business owner Retirement PlanningRetirement Planning

Business Structure Continued…Business Structure Continued…

A.A. Liability IssuesLiability Issues

B.B. Tax IssuesTax Issues

Business Structure Liability Business Structure Liability IssuesIssues

Entity TypeEntity Type Liability Liability ProtectionProtection

Sole ProprietorSole Proprietor NO NO

PartnershipPartnership NO NO

C- CorporationC- Corporation YES YES

S- CorporationS- Corporation YES YES

L.L.C.L.L.C. YES YES

MUST ACT LIKE A MUST ACT LIKE A CORPORATION!!CORPORATION!!

1.1. Separate business bank Separate business bank accountaccount

2.2. Maintain corporate recordsMaintain corporate records

Business Structure Tax Business Structure Tax IssuesIssues

Sole ProprietorshipSole ProprietorshipPartnership or L.L.C.Partnership or L.L.C. S- Corp.S- Corp.

Profit fromProfit fromBusinessBusiness $50,000$50,000 $50,000$50,000

Federal Tax (15%)Federal Tax (15%) 7,5007,500 7,500 7,500State Tax (5%)State Tax (5%) 2,5002,500 2,500 2,500Self Employment Self Employment Tax (15.3%)Tax (15.3%) 7,6507,650 3,8253,825Total TaxTotal Tax $17,650 $13,825$17,650 $13,825

TAX SAVINGS $3,825TAX SAVINGS $3,825

Tax Savings Assuming $100,00 ProfitTax Savings Assuming $100,00 Profit $7,650$7,650

When to Incorporate?When to Incorporate?

1.1. Depends on profit from business.Depends on profit from business.

2.2. Planning is the key – Stay in contact with Planning is the key – Stay in contact with CPA.CPA.

3.3. Corporation cannot be back-dated.Corporation cannot be back-dated.

4.4. Better to incorporate earlier rather than later Better to incorporate earlier rather than later in in order to save tax.order to save tax.

5.5. Sole Proprietor – Most Audited EntitySole Proprietor – Most Audited Entity

BOOKKEEPINGBOOKKEEPING

GROSS INCOMEGROSS INCOME

--- EXPENSES--- EXPENSES

NET INCOMENET INCOME

GROSS INCOMEGROSS INCOME

CommissionsCommissionsRetail SalesRetail SalesRoyaltiesRoyaltiesBonusesBonuses

EXPENSES (1)EXPENSES (1)

ALL : ALL : 1.1. OrdinaryOrdinary

2.2. NecessaryNecessary

3.3. ReasonableReasonable

EXPENSES (2)EXPENSES (2) Cost of ProductsCost of Products AdvertisingAdvertising DuesDues Office SuppliesOffice Supplies Sales TaxSales Tax Down-line GiftsDown-line Gifts Hostess FeesHostess Fees Postage / ShippingPostage / Shipping PrintingPrinting Incentives for team membersIncentives for team members Conventions, Conferences & BoothsConventions, Conferences & Booths Scentsy PartiesScentsy Parties

EXPENSES (3)EXPENSES (3)

Cell PhoneCell Phone (50 to 75% deductible)(50 to 75% deductible)

MealsMeals – – Clients (50% deductible, write on Clients (50% deductible, write on back of receipts)back of receipts)

TravelTravel – – Business RelatedBusiness Related

Auto ExpensesAuto Expenses – – 2009 mileage rate is 55 cents a 2009 mileage rate is 55 cents a mile mile

Required to keep a log, only deduct business Required to keep a log, only deduct business mileage. mileage. (Log example in packet) (Log example in packet)

InternetInternet – – 50% deductible50% deductible

Home OfficeHome Office - - % of Utilities based on square % of Utilities based on square feet (Usually not a big deduction!) feet (Usually not a big deduction!)

EXPENSES (4)EXPENSES (4)

NON-DEDUCTIBLENON-DEDUCTIBLE Life InsuranceLife Insurance Dry Cleaning and LaundryDry Cleaning and Laundry

(Job must require a suit)(Job must require a suit) Fines and PenaltiesFines and Penalties Some Bank ChargesSome Bank Charges (Returned (Returned

Checks)Checks)

BOOKKEEPINGBOOKKEEPING

We recommend Quickbooks ProWe recommend Quickbooks Pro1. Simple1. Simple2. Inexpensive2. Inexpensive3. User Friendly3. User Friendly

Consultants in our OfficeConsultants in our Office1. On-site Training1. On-site Training2. Remote Training2. Remote Training3. On-going Assistance & Help3. On-going Assistance & Help

Retirement PlanningRetirement PlanningThere are Advantages to Start Saving EarlyThere are Advantages to Start Saving Early

Here are the monthly savings required at different Here are the monthly savings required at different ages to accumulate $1,000,000 by age 65, ages to accumulate $1,000,000 by age 65, assuming an 8% compounded rate of return*assuming an 8% compounded rate of return*

Monthly Savings Required to Monthly Savings Required to Reach Reach Age When Savings BeginAge When Savings Begin Goal by Age 65Goal by Age 65

2525 $285 $285 3535 $667 $667 4545 $1,686 $1,686 5555 $5,430 $5,430

By Starting to save at an early age, your monthly savings By Starting to save at an early age, your monthly savings amount may be less than if you wait until closer to amount may be less than if you wait until closer to retirement age.retirement age.

Taxable Vs. Tax Deferred Taxable Vs. Tax Deferred AccumulationAccumulation

Limiting taxes may be effective in achieving your financial goals. The following illustrates the end Limiting taxes may be effective in achieving your financial goals. The following illustrates the end result of saving $2,000 a year for 20 years. There might be a long-term advantage to accumulating result of saving $2,000 a year for 20 years. There might be a long-term advantage to accumulating money on a tax-deferred basis.money on a tax-deferred basis.

The image below illustrates how deferring taxes can increase the value of saving over time. A The image below illustrates how deferring taxes can increase the value of saving over time. A hypothetical value of $2,000 is invested in both a taxable and tax-deferred amount at 8% assumed hypothetical value of $2,000 is invested in both a taxable and tax-deferred amount at 8% assumed interest in year-one. The difference is fairly modest after 5 years. After several more years, interest in year-one. The difference is fairly modest after 5 years. After several more years, however, the difference is more substantial. Allowing the savings to grow tax-deferred for 20 years however, the difference is more substantial. Allowing the savings to grow tax-deferred for 20 years would have provided you with at least $20,000 more than the taxable amount.would have provided you with at least $20,000 more than the taxable amount.

The Power of Compounding The Power of Compounding

ConsistencyConsistency Here you can see, hypothetically, that consistent, long-term savings can produce Here you can see, hypothetically, that consistent, long-term savings can produce equal or even higher results compared with savings with widely fluctuating returns.equal or even higher results compared with savings with widely fluctuating returns.

Starting with a $100,000 balance, which scenario of gains (+) or losses (-) will Starting with a $100,000 balance, which scenario of gains (+) or losses (-) will produce a higher cash balance in ten years*produce a higher cash balance in ten years*

YearsYears Scenario 1Scenario 1 Scenario 2Scenario 2 11 + 15% + 15% + 6% + 6% 22 + 16 + 16 + 6 + 6 33 + 8 + 8 + 6 + 6 44 (- 12) (- 12) + 6 + 6 55 + 9 + 9 + 6 + 6 66 (- 3) (- 3) + 6 + 6

77 + 17 + 17 + 6 + 6 88 (- 5) (- 5) + 6 + 6 99 + 8 + 8 + 6 + 6 1010 + 11 + 11 + 6 + 6

Scenario 1 Fund Value at the end of 10 years = $178, 614Scenario 1 Fund Value at the end of 10 years = $178, 614Scenario 2 Fund Value at the end of 10 years = $179,085Scenario 2 Fund Value at the end of 10 years = $179,085

Financial PyramidFinancial Pyramid

Tax Planning TechniquesTax Planning Techniques

TIME INCOME & EXPENSESTIME INCOME & EXPENSESA. A. Time your IncomeTime your Income

1.1. Defer income into the next yearDefer income into the next year2.2. Delay sending year-end invoicesDelay sending year-end invoices

B. B. Increase ExpensesIncrease Expenses1.1. Purchase items your business will Purchase items your business will

require in require in immediate future to maximize immediate future to maximize deductions for deductions for this year this year (stock up on (stock up on office supplies).office supplies).

2.2. Pay Bills EarlyPay Bills Early-- rent, insurance, rent, insurance, utilities, cell utilities, cell phone, subscriptionsphone, subscriptions

3.3. Contribute to a Retirement PlanContribute to a Retirement Plan

Tax Planning Techniques Tax Planning Techniques Continued..Continued..

4.4. Contribute to a Health Savings AccountContribute to a Health Savings Accountaa. $5,950 for 2009 with a high deductible health plan – a . $5,950 for 2009 with a high deductible health plan – a high deductible health plan is defined as a deductible f high deductible health plan is defined as a deductible f $1,150 for an individual policy or $2,300 for a family $1,150 for an individual policy or $2,300 for a family policy.policy.

5.5. Purchase an automobilePurchase an automobile6.6. Throw a Company Holiday PartyThrow a Company Holiday Party

a. The cost of such events is fully deductible.a. The cost of such events is fully deductible.

7.7. Hire Children -- $5,700 to each childHire Children -- $5,700 to each childa. Children home from college or other family members a. Children home from college or other family members who are in low tax brackets can receive wages that are who are in low tax brackets can receive wages that are deducted at the parent’s high tax rate and taxed at the deducted at the parent’s high tax rate and taxed at the children’s low tax rates.children’s low tax rates.

Section 179 Depreciation Section 179 Depreciation DeductionDeduction

Eligible Property for the Section Eligible Property for the Section 179 Deduction:179 Deduction:

1. Machinery & Equipment1. Machinery & Equipment2. Furniture & Fixtures2. Furniture & Fixtures3. Trucks3. Trucks4. Off-the-Shelf Computer Software4. Off-the-Shelf Computer Software

Section 179 Deduction Section 179 Deduction ContinuedContinued

5. Sport Utility-Vehicle Deduction5. Sport Utility-Vehicle Deduction

a. If an SUV with a gross vehicle weight a. If an SUV with a gross vehicle weight of more than 6,000 lbs. is purchased for of more than 6,000 lbs. is purchased for business use, $25,000 of its cost can be business use, $25,000 of its cost can be immediately deducted, with the immediately deducted, with the remainder deducted through normal remainder deducted through normal depreciation deductions.depreciation deductions.

Hot Topics With The IRSHot Topics With The IRS

A.A. S-Corporations must pay a reasonable salary to S-Corporations must pay a reasonable salary to shareholders.shareholders.

1. If you do not do this, your audit risk increases 1. If you do not do this, your audit risk increases significantlysignificantly

B.B. Company vehicles must be licensed in the name Company vehicles must be licensed in the name of the companyof the company

C.C. Use mileage logs to compute business usage for Use mileage logs to compute business usage for company vehicles (must be reasonable)company vehicles (must be reasonable)

D.D. Keep receipts for Keep receipts for allall business deductions for at business deductions for at least four yearsleast four years

What To Look For In A CPA What To Look For In A CPA FIRMFIRM

1.1. Do they know your business?Do they know your business?

2.2. Do they plan with you or just prepare your Do they plan with you or just prepare your tax tax return?return?

3.3. Response Time: Phone Calls or Emails?Response Time: Phone Calls or Emails?

4.4. What costs are involved?What costs are involved?

5.5. Due Diligence -- Ask around!Due Diligence -- Ask around!

Shaw & Associates, P.C.Shaw & Associates, P.C.Why Use Us?Why Use Us?

1.1. We know Scentsy – Look for the Scentsy link on our We know Scentsy – Look for the Scentsy link on our website for specific Scentsy advice.website for specific Scentsy advice.

2.2. Because we know Scensty – Usually less expensive Because we know Scensty – Usually less expensive than other than other CPA firms.CPA firms.

3.3. We specialize in tax planning & business We specialize in tax planning & business organization.organization.

4.4. Phone calls & emails returned promptly.Phone calls & emails returned promptly.

5.5. You will receive more personal attention. We know You will receive more personal attention. We know all of our all of our clients.clients.

6.6. Out of State – No ProblemOut of State – No Problem