Many factors come into play when choosing the right tax structure for your company, and not sifting through every factor can lead to the wrong decision. Some important items to consider include the size and nature of your business, your vision for the future and the level of control you want to have within the organization.
With the economy slowly beginning to turn around, now might be a good time to assess your current tax structure to determine if it’s the best one for you. You want to make sure your company is getting the most out of the tax structure, and if it’s not, it might be time to think about restructuring.
“You need to set up a meeting with your team — your accountant, attorney and business partners — and determine if you are doing the best things for the company, and if you could be doing things better,” says Dennis R. Mowrey, director, tax and business advisory services at GBQ Partners LLC. “It’s important to choose the best tax structure to be able to take advantage of vital tax benefits and have the right legal flexibility, and to maximize the value of the company now and in the future.”
Smart Business spoke with Mowrey about factors to consider when choosing a tax structure.
What are some key things you need to be aware of when choosing a tax structure?
- The level of control you want to have
- Legal liability and protection of personal assets
- Tax implications
- Expected profit or loss
- Reinvestment opportunities
Who should be involved in the decision making process?
The best people to have involved are your accountant, attorney and other business advisors you may have (such as bankers). All should be consulted as soon as you start to think about setting up a business. All should also be consulted as you make decisions regarding the company moving forward.
Your team, especially your accountant, can also help you decide which tax structure is right for your company. It’s good to be as upfront as possible with your team so the best decision is made and all avenues are explored. Too many times people do things and think about the consequences afterward, and then wonder why things did not turn out as they expected (i.e., getting a tax assessment for taxes they were not expecting to pay).
