Sole Proprietorship = Lowest Tax Rate?

A new study commissioned by the Small Business Administration finds that “sole proprietorships pay taxes at the lowest average effective rate, 13.3 percent. In comparison, small business partnerships have an average effective tax rate of 23.6 percent, while S corporations’ average effective tax rate is 26.9 percent, according to Quantria’s study of IRS data from 2004.” (Becker, H. ; nuwireinvestor.com)

That’s not the whole story though.  Sole proprietorships account for 84% of small businesses with gross receipts under $25,000…which effectively makes their tax rate very low.  By contrast, partnerships and S Corporations together make up a third of all small businesses with between $100,000 and $250,000 in gross receipts. 

In my opinion, your business’s legal form should really depend on what services or product you offer, what industry you’re in, and most importantly what potential liability you may have.  Whether your taxes are a bit lower or not is secondary.  Unfortunately for any business owner today, the threat of frivolous lawsuits warrants careful review of your legal entity and most likely excludes the sole proprietorship as a viable entity.

For my business, Inland Accounting Services, I wouldn’t consider keeping it as a sole proprietorship; based solely on the need for protection of my personal assets from frivolous lawsuits.  To me, that protection is worth the extra cost of maintaining the corporation and supposed extra taxes. 

In the end, we all must decide for ourselves, but at least, let us be informed.  Thanks for reading. 

 

Inland Accounting Services – Staff

www.inlandaccountingservices.com

Double Digit CA Unemployment…Ouch!

Hi all,

The EDD released figures today that California’s unemployment has crept over 10%.  The national average is at 7.6% so we are quite a bit higher here in the Golden State.  I love living in California, but I’ve got to say that number hurts a bit.  It’s definitely in line with my experience I’m sad to report.  I would say that at least 10% of my circle of friends, colleagues, etc. is unemployed.  As a small business owner, I too have felt the hit and had to layoff workers over the past year.  No surprise here…we’ve all become too acquainted with layoffs recently.

Still though, I’m not ready to pack it in and move to Texas like so many seem to be doing these days.  For the record, I’ve heard many rumors, but don’t actually know anyone who has moved to Texas…fear and the rumor-mill are powerful though aren’t they.  I still like living here.  My business is here, my family is here and you can’t beat the weather. 

I’m going to go out on a limb here; and mind you I’m no economist.  But if the remaining 90% of the population would spend a little bit more of their hard earned money we might start to see this thing turn around.  Don’t stop saving or being responsible, but notch up the spending just a bit and see what happens.  In fact, if you need help with this part I can be of assistance…hire us to do your bookkeeping and not only will you be helping the economy, but you’ll suddenly find yourself with more free time to focus on making more money.  Sounds good to me.  Let me know if I can be of any assistance with helping you spend more…or make more money!

Thanks for reading.

 

John Mole – Inland Accounting Services

www.inlandaccountingservices.com

Credit Card Debt Forgiveness

Hi all,

I was just reading an article in the Associated Press about a recent proposal to forgive credit card debt.  Apparently several of the ”Big Banks” (not sure who they are) “have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven” (Gordon, Mary – AP).  This is a major shift in policy for the banks as not long ago they were pushing for the opposite.  The cause appears to be the result of worsening in the economy…”Now, banks making credit card loans have reached a point where they can lose less by forgiving part of the debt than seeing the consumer walk away entirely.” (Gordon, Mary – AP) 

This is just further evidence that the financial troubles of late are continuing to spread.  Things have not hit bottom yet…or at least that’s how it appears.  I think it’s worth noting that big banks don’t move quickly, especially considering an alliance of banks and consumer advocate groups.  So, in order for them to be reacting, means they are probably using data from a while ago.  

So, it could be that we’ve already hit bottom and have been hanging around down here for a couple months.  Who knows…maybe things will even get better within a couple months…dare to dream!  Thankfully, our credit card debt is in check so this won’t help us, but I hope it may help you!  We all need help in one way or another these days. 

If you find yourself in need of a professional accountant’s services, please consider our company.  We are here to help!

Thanks for reading,

 

Inland Accounting Services Staff

www.inlandaccountingservices.com

New Blog

Hi all,

This is our first blog entry.  This will be a company blog and will be posted to at least weekly by one of our staff.  We will be discussing mostly current events and news that pertain to the world of finances and accounting, to our lives, and to the lives of our clients. 

We will endeavor to provide content that is interesting (at least), but that will also open a window into our lives, our hopes, our concerns, and our business.  It is our aim to be a leader in the accounting services industry.  We wish to lead by our example of service, thoughtful products, and value for our clients.

We hope you find this format insightful and meaningful.  Please feel free to contact us directly with any questions or concerns.  As well, please feel free to post responses in this forum for all to see.

Sincerely,

 

The Staff of

Inland Accounting Services

www.inlandaccountingservices.com

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