Haik Chilingaryan, Income Shifting Strategies For Business Owners

This post discusses different strategies that can potentially help a business owner become more tax efficient. Some methods include the restructuring of a business and establishing tax-deductible retirement plans.

Synopsis

The concept of characterization of income (or shifting of income) may result in the preservation of significant wealth. One method of shifting of income is through retirement planning. Another method is the restructuring of a business entity.

Retirement Planning

If the taxpayer is working and participating in a 401K with his employer, or he has an IRA, meaning it’s funded entirely by the taxpayer, the money that goes into such accounts may save him on taxes.

When the taxpayer puts money in such plans, he decides that instead of paying taxes now, he will instead pay taxes when he take those funds out, preferably when his tax brackets are likely to be reduced at his retirement. That’s because his total taxable income is likely to be lowered since he is no longer working, thereby lessening his income tax obligations.

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Haik Chilingaryan, Tax Lawyer, Tax Savings For business Owners

This segment discusses different strategies that can potentially help a business owner become more tax efficient. Some methods include the restructuring of a business and establishing tax-deductible retirement plans.

Synopsis

The concept of characterization of income (or shifting of income) may result in the preservation of significant wealth. One method of shifting of income is through retirement planning. Another method is the restructuring of a business entity.

Retirement Planning

If the taxpayer is working and participating in a 401K with his employer, or he has an IRA, meaning it’s funded entirely by the taxpayer, the money that goes into such accounts may save him on taxes.

When the taxpayer puts money in such plans, he decides that instead of paying taxes now, he will instead pay taxes when he take those funds out, preferably when his tax brackets are likely to be reduced at his retirement. That’s because his total taxable income is likely to be lowered since he is no longer working, thereby lessening his income tax obligations.

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Haik Chilingaryan, Tax Reform And Individual Taxes

During this post, we discuss how the new changes in the tax laws may have an overall positive effect on individual rates and deductions. However, a crucial component of the Tax Cuts and Jobs Act is that the rates and other provisions of the new tax code have a sunset provision, which means that on December 31, 2025, all of the rates are likely to be reinstated unless some legislation is introduced that will retain these rates or lower them even further.

Synopsis

The Tax Cuts and Jobs Act of 2017, otherwise known as GOP tax reform bill, largely went into effect on January 1, 2018. A crucial component of TCJA is that the rates and other provisions of the new tax code have a sunset provision. This means that on December 31, 2025, all of the rates are likely to be reinstated unless some legislation is introduced that will retain these rates or lower them even further.

The following are the list of major changes under the new tax code:

  1. Brackets Lowered (rates sunset on December 31, 2025)
  2. Personal Exemptions Repealed
  3. Standard Deduction Nearly Doubled
  4. State and Local Tax Deduction limited to $10,000
  5. 21% flat rate for C-corporations
  6. Qualified Business Income Deduction for Pass-Through Businesses
  7. Estate Tax Exemption More Than Doubled

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The Supreme Court of California issued a ruling on April 30, 2018, which is likely to have a significant adverse impact on business owners. The primary issue in the matter of Dynamex Operations West Inc. v. The Superior Court of Los Angeles County was whether an entity that hires an individual worker can classify such a person as an employee or an independent contractor.

The ruling now creates a rebuttable presumption that such individuals are considered employees. The ruling, however, is limited to only California’s wage orders. As such, it would not currently apply in other contexts such as for workers’ compensation or for tax purposes. Therefore, an entity may be able to classify a worker differently depending on the context.

Wage Orders

In 1913, the Industrial Welfare Commission (IWC) was established in California in order to regulate wages, working hours, and working conditions. In 2004, the legislature of California defunded IWC, however, the wage orders established by IWC are still enforced to this day by the California Department of Industrial Relations, Division of Labor Standards Enforcement.

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Haik Chilingaryan, Five Fundamentals Of An LLC

A Limited Liability Company (“LLC”) is a hybrid business entity which contains elements of a partnership and a corporation. LLCs consist of members and managers. An LLC may provide tremendous benefits for its members, which include asset protection, intergenerational transfers, tax saving strategies, wealth preservation, flexible management structures, and clarity on the roles of all essential parties involved in the company as set out in the Operating Agreement.

The following five concepts are fundamental for establishing an LLC: Asset Protection, Intergenerational Transfers, Tax Saving Strategies, Management, and Funding.

Asset Protection

Generally, the more assets a person owns in one’s name, the more likely it is that he or she will be a target mark for creditors. This is why it’s good practice to own as little as possible in your own name. In order to accomplish this goal, it’s important to evaluate the types of asset protections tools that are available to you. An LLC is one such tool that is effective for asset protection purposes.

For creditors of the LLC itself, a member’s personal liability will generally be limited to the amount of the member’s investment in the LLC unless the member personally guarantees the transaction in question.

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