An Overview Of The Best Business Structure For Consultants

After becoming a consultant, it is tempting to concentrate on the advantages of being self-employed. In all likelihood, you will not have thought much about the best business structure for consultants. However, it is vital to give some consideration to this, to increase your bottom line and reduce your tax liability. There are four main kinds of structures that the majority of consultants opt for. All have their own distinctive set of benefits and drawbacks:

The Sole Proprietor Model

consultants
Corporation shareholders have restricted liability protection.

As a sole proprietor, you are classed as an unincorporated company, or an independent contractor, consultant or freelancer. You don’t have to complete any forms to begin this kind of venture. All you have to do is declare your business expenses and income on Form 1040, under Schedule C. Taking this route is the simplest way to get started in business — and the simplest way to dissolve your business if things go wrong — however, it offers limited safeguards.

The C Corporation Approach

C Corporations are incorporated businesses that enter their tax records on Form 1120. Each type of business, aside from the sole proprietor model, is regarded as an individual entity, which typically offers shareholders a degree of financial and legal protection. Corporation shareholders have restricted liability protection. Also, corporations control how much money they retain or distribute. Most corporations are classed as for-profit organizations, so they could potentially make a loss for many years.

Although this might help you when it comes to filling out your tax return, it is best to speak to your tax adviser like Walker Wayland AMD Chartered Accountants for further details.

The S Corporation Structure

An S Corporation shares similarities with a partnership (which is taxed on Form 1120S). If any shareholders provide services to the company, the S Corporation has to pay those shareholders fair wages. These wages are separate payments from profit or loss distributions. An S Corporation has the same fundamental benefits and drawbacks of a closed or general corporation. An S Corporation avoids being ‘taxed twice’, unlike a C corporation, because all loss or income is only declared once on the shareholder’s tax returns.

Nonetheless, as with regular corporations, and in contrast to certain partnerships, shareholders of S Corporations do have personal liability for any business debts.

The LLC (Limited Liability Partnership) Option

An LLC is an unincorporated business (taxed on Form 1065). In contrast to corporations, these organizations require a General Partner. This individual, or individuals, assume unrestricted liability for the company. Also, partnerships require at least a couple of shareholders and distribute all the profit and loss to these shareholders, with no concern for any money retained by the company to facilitate cash flow. Lots of business people think that LLCs are a better option than partnerships and corporations because they include many of the benefits of each.

corporations
Partnerships require at least a couple of shareholders and distribute all the profit and loss to these shareholders.

Final Thoughts

Although the above business structures are the main ones that will be relevant to you, other options exist — such as nonprofit organizations and trusts, however, they are not usually utilized by consultants. Just be aware that there are many possibilities for your company, as far as choosing your structure goes. Always pose the right type of questions to yourself, such as: “Is it indispensable to incorporate?” and “How will this benefit me?”.

 

How a Bookkeeper Can Boost Your Business

Whether you are hiring independent contractors, an accounting firm, or several accountants for your bookkeeping needs and a variety of finance management tasks, there should always be standards that need to be met especially in bookkeeping part as these ledgers and other documents are necessary to provide precise and accurate financial report.

Business Evaluation

A well-documented financial report can provide you pertinent information in order to evaluate the performance and assess the standing of your company against its competitors. As a business head, these are very vital in ensuring the growth of your business. These reports also involve trends which are great tools to determine the future of your business. So in order to accurately document the inflow and outflow of money, you will have to assert certain standards and detect particular indications which would result to quality bookkeeping.

online bookkeeping software

Organise Your Bookkeeping Systems

A system must be in order to make sure that every transaction is listed and sorted out. You can employ the aid of bookkeeping software so your employees can input data real-time. Having a centralized system would be a very efficient and effective means of collecting all the information necessary for your financial transactions to be laid out.

Sorted, Arranged and Categorized

If you are doing it manually, it helps that everything is sorted and arranged depending on the date and kind of transaction carried out. Having an itemized list of transactions would make things a lot easier for the people who will be working on accounting and auditing your finances. They won’t get stressed trying to match and figure out which transactions are similar and which transactions were really carried out. This also prevents double entries which can affect tremendously in the entire financial documentation process.

On Time

Bookkeeping of your accounts need to be prepared at a certain date before the tax filing deadline comes. Thus, entries from a specific time range must be collected prior to the date with allowable difference from the deadline. Also, the entries need to be accurate in every aspect. You wouldn’t want to get jailed and serve sentence for tax evasion.

Working on books

Conclusion

These are just some of the indications and qualities that appropriate bookkeeping entails. While everything may seem so hard to carry out, it would be a lot easier if you would hire a professional bookkeeper to do all the work for you. In Mandurah, Western Australia WW AMD Chartered Accountants provide a range of professional bookkeeping services outlined in this article. You could find a similar bookkeeping provider in your local area. This will save you a huge amount of time and effort which you can spend in other vital parts of your company or with your friends and loved ones.

Tips on Minimizing Your Business Tax

As a business owner, you don’t want to spend more tax than is necessary. It is also best to avail the services of the accountants, like Accountants Cherry Black, for consultations and proper tax filing. Yet, consider these top 10 tips from business tax accountants to help you get the best of tax deductions and refunds.

1. If possible, your taxable income should be deferred until the following financial year. The income receipt can be delayed by cash based businesses while invoicing can be deferred by non-cash operations.

2. Take advantage of a tax deduction by writing off old plant or stock before 30 June.

3. For year end expenses incurred but not yet actually paid by 30 June, claim an immediate deduction.

This includes employee salaries and wages earned but not paid by 30 June. In addition, staff bonuses also qualify for a tax deduction when it is a definite expense that the business has committed to.

Any maintenance and repairs are also tax deductible if billed and undertaken before the end of the tax year.

4. Instead of paying full income tax at 46.5%, split the income as company (30%) or lower taxed spouse (16.5% or 0%).

5. Physically write off the business’s bad debt before 30 June. This can only be done if you have proof that you have have genuinely attempted to recover the debt. Also, the debt has to have been shown as income before being written off.

6.Small Business Entity (SBE) concessions are available for businesses with a turnover of less that $2 million.

For example, prepaying expenses like interest, insurances, rent, subscriptions, rent and lease payments enables an immediate deduction.

7. Don’t get caught in the trap of spending money simply to qualify for tax deductions. Remember, you will only receive 30% back if you are a company held business.

8. Pay your employee superannuation contributions by 30 June in order to be eligible for the tax deduction of that financial year.

payment

9. Before the end of the financial year, repay any interest and principal on any loans borrowed from your company. If you don’t, the entire loan amount will be taxed at the much higher marginal rates. This may include using company assets like vehicles for private use.

10. Finally, in the event of a tough financial year, you can vary the PAYG instalment for the last quarter of the financial year.

Ideas On Selling Investment Property

The goal of an investment property is to make money for the owner; so when it comes to selling that property, making a profit is going to be a top priority. In many ways, selling an investment property is similar to selling a home, where you hire an agent to market the property to potential buyers. However, investment properties operate under different tax rules than the home you live in, so you’ll need to be aware of this. Here are some factors to consider when thinking about whether to sell your investment property.

The Neighborhood Has Changed

properties

If you purchased a good property when the market was down, you may have made a nice return, and it could be a good time to cash out. However, if the opposite has happened and the neighborhood is deteriorating, you might want to get out before property prices in the area fall too far.

The Property Needs Major Repairs

Whether it’s a crack in the foundation or a roof that needs to be replaced, if substantial repairs are needed and you don’t want to put the time, money and energy into it, it may be time to sell the property. However, you will need to disclose these issues to the buyer which may affect the property price.

The Property Is A Tax Liability

Owning property can actually raise your tax bracket, so that may be a good reason to sell, especially if you are no longer interested in being a landlord. Before selling, take note of the expiration of any potential tax abatements.

There Are Better Returns Elsewhere

When looking at your investment, you should consider all of your options. If you have had a property for a long time, it may have increased in value, which could be a good opportunity for conveyancing the property and diversifying the proceeds into other properties or investments, such as stocks and bonds.

Managing Your Money

Managing your money is crucial to your financial health. Take proactive steps to handle banking, money and accounting issues. This way, you will keep track of your spending and save money.

1) Keep all paperwork

paperworks

Keep accurate records of all your financial transactions. Have a separate file for income and another one for expenses. Once you know where the money goes, you can take steps to cut expenses.

2) Keep it Simple
Your financial records do not have to be complicated. A simple spreadsheet will do. Just keep the records simple and you will achieve great results with it.

3) Keep Multiple Accounts It is not prudent to have only one account. You should have at least to bank accounts. One account should be your salary account while the other one is your savings account. This enables you plan your income and save money.

4) Payment Dates
You should harmonize your direct debit dates to ensure there are no gaps between the payday and the payment due dates. This way, you pay your bills conveniently and have a healthy liquidity position all the time.

5) Clear Debts First
Pay off your debts as soon as you can because servicing a loan takes a large chunk of your money. Avoid payday loans and take bank loans only when you need them.

6) Audit Your Accounts
Take out time to audit your personal accounts every week. This is one way to spot unnecessary expenses and take corrective measures.

7) Keep to the Agreements
Keep agreements with your banker and your credit card companies. Avoid late payments and always play by the rules. This way, you will save money on bank charges and penalty charges.

8 ) Understand Online Benefits

working

Most banks offer internet banking services these days. Take advantage of the online option and manage your accounts from the convenience of your home or office.

9) Pay Attention
Review your transactions regularly and look out for errors and omissions. Report any suspicious looking transaction to your banker and never take things for granted.

10) Read the T&Cs
Finally, you should read all the terms and conditions and try to understand everything there. Knowledge is power so you should get all the information you need so that you will enjoy a beneficial relationship with your bank.

The Importance Of An Accountant

Over-relying on free or inexpensive accounting service tools for business analysis can prove ineffective and costly for many small business operators. Instead, it’s always wise to involve qualified accountants.

When dealing with professional accountants, it helps to know what to inquire and when. That way you can be sure that you’re getting your money’s worth.

What’s the best way to get in touch and how often?

Cultivating a frequent and healthy relationship with your accountant is essential. by frequent we mean weekly, monthly or bimonthly. Popular ways to get in touch include phone or via social media handles (Skype, Google, Facetime).

Preparing for the tax season

accountant

The primary reason why small business operators hire accountants is to get help with tax preparation. Get informed of new tax laws as well as deductions or claims you can take advantage of to minimise tax burdens. Its advisable to seek such counsel before the deadline of April 15.

Ongoing considerations

It’s in your best interests if your accountant gets to know more about your business as time progresses. This provision allows the expert keep you aware of new developments and to adjust to them in the shortest time possible.

How accountants can help grow your business

With a proper foundation, a qualified accountant can help small business achieve positive growth. First, you must build a robust financial model and update it regularly.

Keeping track of cash flow

Projecting business cash flows can be a daunting task. However, with the help of a qualified accountant, such an exercise becomes much easier. Once you develop a clear projection, the next step is to stick to it.

Understanding your break-even point

Understanding your business’s break-even point is essential in determining aspects such as pricing and profitability. Accountants can help you estimate how many products or hours you need to work to break-even.

Assessing your business value

By examining your financial blueprint and applying the discounted cash flow analysis, your accountant should be able to estimate your business’s worth.

Negotiating business contracts with accountants

meeting

Though accountants are not licensed to practice law, they can collaborate with your attorney to offer a better experience.

Finally, remember to strictly follow your accountant’s advice, its the whole point of hiring them in the first place.

Effective Ways To Invest

Investing for the future is extremely important; however, many people are unsure about how to handle money and accounting principles. Below are a few strategies that can help you to successfully reach your long-term investment goals.

Reinvesting Dividends

Many companies allow you to automatically reinvest dividends when you purchase stock in their company. This is often a good way to build up your share volume and increase your holdings. If you are invested in a mutual fund, the dividends of your securities are usually automatically reinvested into the fund which allows you to buy more shares in the fund without incurring a fee.

Diversification

stocks

Diversification is a strategy in which you purchase a variety of different investments, such as stocks, bonds and real estate assets, to reduce risk from market volatility. With diversification, the value of your assets is not dependent on the performance of one particular security. Mutual funds allow you to diversify your investments easily and cheaply as your investment dollars are spread out over several different securities. You can diversify your assets even further by investing in more than one mutual fund.

Systematic Investing

For long-term investment goals, the length of time that you invest matters more than timing the market. Systematic investing is a good way to ensure that you have enough funds to meet your financial goals. It is also an easy and effective way to accumulate a lot of assets over time. With systematic investing, you are paying yourself first, before bills and rent. Some mutual fund companies allow you to invest small, minimum amounts using automatic electronic fund transfers from your account without you having to think about it.

Dollar Cost Averaging

stocks exchange

Systematic investing allows you to benefit from dollar cost averaging. This is a disciplined investment strategy that involves investing a certain amount of money regularly so that you can purchase more shares when the share price is low and fewer shares when the price is high. This means that you will pay a lower average price for your shares than someone who only tries to time the market. This strategy can greatly increase the value of your investments over time.

Helpful Advice For Your Finances

Money is a major source of stress for many people, particularly for millennials who may not always possess the life experience and financial knowledge that older generations have. In addition, many millennials feel that they have made good decisions, such as getting a college degree, only to wind up with debt or find themselves facing one money issue after another. Here are some of the typical financial problems millennials may face and some tips for dealing with them.

Too Much Debt

For many millennials, having too much debt (including student loan debt and credit card debt) is their main source of financial stress. To tackle this issue, it may be tempting to ignore the problem, but it is important to make a plan to get out of debt. To avoid spending years paying off the debt, you will need to pay more now. This will not only help you to get out of debt faster, but you will also avoid paying thousands of dollars in interest charges. In addition, try to pay more than the minimum payment each month if possible. Another good strategy is to negotiate with your bank or credit card company for a lower interest rate.

High Rent And Living Expenses

apartment

Many millennials prefer to live in big cities to pursue jobs and enjoy a more active social life. However, this often translates into a higher cost of living. If you want to live in a big city, try to take advantage of the amenities in order to lower your living expenses. For example, get rid of your car and use the city transit instead. You can also try splitting the rent with a roommate, or negotiate with your landlord for a rent decrease. Another important step is to grow your income so that it keeps pace with your high living costs. You can do this by looking for freelance jobs or working side gigs for extra money.

The single best way to tackle financial problems is to aim for a lower cost of living. Don’t be afraid to live more cheaply than your friends or move to a cheaper city if it helps you meet your financial goals.