Business & Investing
Sponsored by

Need advise, first year small business owner

2,555 Views | 14 Replies | Last: 5 yr ago by BigPuma
Bag
How long do you want to ignore this user?
AG
I have started my own company this year and look to make a profit of around $400k this year.

I am a sole proprietorship and have no idea, at this point, how to navigate the income tax waters. I would like to reinvest the profits into the business to mitigate the tax burden but have no idea where to start.

I thought about purchasing a couple rental properties with the profits. If I were to do this, can I take the money invested in those homes and deduct them against profits?

Sorry for the noob question and thanks in advance.
IrishTxAggie
How long do you want to ignore this user?
AG
You need an accountant.
Bag
How long do you want to ignore this user?
AG
Thanks, and I have one lined up, just wanted to get general opinion before I go down that rabbit hole.
austinrb10
How long do you want to ignore this user?
AG
Instead of distributions what about retained earnings? Accounting for depreciation? I agree, working with a cpa is your best bet to understand your options. Congrats, though, on the profitability. I assume o&g to have that kind of return so quickly?
Bag
How long do you want to ignore this user?
AG
Thanks, SaaS model for IIoT is the niche, focused on all verticals, but being in Houston O&G is what pays the bills...
2wealfth Man
How long do you want to ignore this user?
AG
1st yeat $400k profit!!! Good job!
Curios Ag
How long do you want to ignore this user?
AG
I'm not sure about a rental property BUT you do need an office for your new business Look into smaller commercial property. Occupy a small portion and lease the rest. Small Flex-Space that you can rent to HVAC or another trade.

and/or

Reduce your taxable/ordinary income :
Max a Solo 401K
Employer Profit Sharing
Start an Employer Pension Plan : Cash Balance Plan

I made my wife a co-owner and max her 401K, profit share and the CBP. So double dipping.
Regarding Cash Balance Plan. I pay myself 180K salary but that allows me (employer) to contribute 100K as an expense to the company. The CBP contributions are age and salary based and it's a defined plan but it's awesome if you don't have any employees and have maxed everything else.

Max all your tax deductions. Backdoor Roth, 529's, HSA,

And yes - hire a CPA.
DRAINS_05
How long do you want to ignore this user?
AG
John Penewit,

Great CPA and Aggie

JPenewitt@tbkcpa.com
Tell him David Rains referred you
Gig’em!
11taxman11
How long do you want to ignore this user?
AG
Hi Bag,

Congrats on utilizing your skills right off the bat. Portland Ag's ideas are really good but do take some time to set up so it's a good thing you're starting this process now so you can complete most of it by year end.

If you'd like to talk further, I'd be glad to help. www.henrykcpa.com
dlp3719
How long do you want to ignore this user?
AG
To answer your question, no you can't 100% depreciate your rental property. It's going to be over 39.5 years (most likely) so while you'll get a little depreciation, you won't get much this year.

Now if you need equipment or a heavy duty vehicle, you could 100% depreciate that. But it's a SaaS business so likely you don't need much on the equipment side.

As others have already said, get a CPA, employ lots of retirement strategies (SEP IRA, solo 401k) and enjoy the success.

Unfortunately, if you make good money, you get to pay taxes.
gig em 02
How long do you want to ignore this user?
It can't be said enough and I've seen way too many small business owners go under because they thought an accountant was too expensive.

Get an accountant, today.
RAB83
How long do you want to ignore this user?
AG
Don't just get an accountant. Get a CPA, preferably an independent guy who maybe has a few people working for him. You'll get more attention. Tell him you are looking for a long term relationship.
one MEEN Ag
How long do you want to ignore this user?
AG
Bag said:

I have started my own company this year and look to make a profit of around $400k this year.

I am a sole proprietorship and have no idea, at this point, how to navigate the income tax waters. I would like to reinvest the profits into the business to mitigate the tax burden but have no idea where to start.

I thought about purchasing a couple rental properties with the profits. If I were to do this, can I take the money invested in those homes and deduct them against profits?

Sorry for the noob question and thanks in advance.
Hey Bag,

Congrats on your first year's performance! You briefly mentioned your business model is selling an industry internet of things service for the OG industry.

I'd enjoy hearing more about your experience in the industry and how you got into IIoT. I know weatherford puts these hardened 'dots' on all their tools that has their maintenance history stored on them. Is your business more aligned with that or selling optimization of tool performance based on downhole parameters?

IslandAg76
How long do you want to ignore this user?
AG
>>>You need an accountant. >>>

You don't need just an accountant--most of them just keep score--they put numbers in boxes.
You need someone who will tell you how to minimize your tax obligations, how and when to use your excess cash flows. Having a $400k profit in year one suggests you may benefit from more than an accountant.
Being a sole proprietor in 2018 (I think) is a good thing.

It is difficult to avoid taxes but you can minimize and postpone them--with good accounting and good advice.
Bag
How long do you want to ignore this user?
AG
All, thanks for the advice, I will work towards getting a CPA.

OMA, to answer your question, my company is focused on the geospatial component to IIoT devices. We offer an aggregation engine for all sensors in order to understand real-world context and offer the ability to do geospatial analytics on historical and real-time data

We target all verticals and can work with any web-based API

BigPuma
How long do you want to ignore this user?
AG
Bag congrats on your short term success thus far. I hope your venture continues to thrive. If you want to have a phone call to discuss you venture's accounting and tax needs please give me a shout. My email is jpenewitt at tbkcpa dot com.
Also thank you Drains for recommending me.
Refresh
Page 1 of 1
 
×
subscribe Verify your student status
See Subscription Benefits
Trial only available to users who have never subscribed or participated in a previous trial.