Employee - owner - taxes - etc

Discussion in 'Business Operations' started by onelegjohn, Apr 16, 2003.

  1. onelegjohn

    onelegjohn LawnSite Member
    Posts: 77

    Here is what I want to do.

    I am a chemist but love to mow lawns. I love the equipment, the tools, and the garages...the money. I still do it on the side.

    I am too busy with my real job to mow and landscape. Instead of buying a dump truck, skidloader, mowers, pressure washers (all the cool stuff) with my personal money from my full time job - it makes sense to me to start a business that could depreciate all the equipment I want.....and possibly make money.

    Starting this business would hide the cost of all my toys.

    If I were to hire my brother to mow and landscape I would have to pay matching tax. I would basically give him freedom to make as much as he wants as long as bills are paid.

    Could I also draw my own salary from this?

    Say the business grosses 100k
    My brother gets a salary of 40k
    operating expenses are 50k

    What do I do with the 10k profit? If I am a corporation I could pay dividends right? What if I own all the stock...will I still get hit hard in taxes? I just want to find the best way to hide the 10k profit.
     
  2. Turf Medic

    Turf Medic LawnSite Bronze Member
    Posts: 1,073

    If you are incorporated, leave the profit in the business, you won't be liable for the taxes unless you take it out. The corp will have to pay taxes on the profit, but at a much smaller rate and you won't have the self employment tax that will run about 16%. Who knows after a few years the business may have enough capital to purchase some real estate. Talk to your CPA, to get the straight scoop, but I think you can also have the business provide you with a vehicle, tax free to you. You will need to be a full corporation C not S to take advantage of this, with a S corp the profit or loss carry through to the owner. You can also set up a Limited Liability Company and have the IRS treat it as a corporation and get the same benifits without some of the restrictions placed on you by the corporation.
     
  3. John Allin

    John Allin LawnSite Bronze Member
    Posts: 1,489

    Don't we all wish it was just that easy ??
     
  4. Turf Medic

    Turf Medic LawnSite Bronze Member
    Posts: 1,073

    Could you elaborate John, it's been several years since we had a corporation. But at the time we could any profits that we left in the corporation was taxed at a lower rate than if we took it as wages and we did not have to pay any of the social security/medicaid taxes except on what we took out as wages. I also paid my medical, life and auto insurance through the company, and was able to pay some continuing education expenses. This may have all changed, in the last few years.
     
  5. Fvstringpicker

    Fvstringpicker LawnSite Fanatic
    Posts: 7,596

    TM: You're stretching some of the benefits of a corporation and LLC. You're giving some good advice on talking to a CPA. I just want to add to talk to a CPA long before setting up the business structure and what can be reasonably expected in using the corp as a tax shelter.
     
  6. hustlers

    hustlers LawnSite Senior Member
    from MN
    Posts: 257

    i dont know if thats all legal, cause if its a corp
    then your brother must have workers comp and
    you will to if you do any physical work or draw a salary

    if its not a corp you will have to pay normal personal taxes on the profits, etc
     
  7. onelegjohn

    onelegjohn LawnSite Member
    Posts: 77

    I appreciate the help. So I will talk to my CPA. Seems to be the best thing I can do. Thanks again though.
     
  8. ericmurry

    ericmurry LawnSite Member
    from Chicago
    Posts: 1

  9. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Posts: 2,116

    So what's your brother going to do between the time you start this venture and the time your gross sales are up to $100,000????

    Later,
    DFW Area Landscaper
     

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