Entity choices With Jordon Comstock and Ben Tuinel

Let’s stick on that for a second here, the business entity type. I’ll let you know how I set up my business, or at least how I was advised to set it up. I created an LLC for my business. So, Veritas Dental Resources is an LLC. My attorney advised that well, you can’t be an employee of your LLC, so you’re going to have to have that LLC owned by an S corp. The S corp is designed to be a parent company. I told him I’m going to have multiple businesses that I’m going to own. He said the S corp would be a great tax umbrella for all the other LLCs that I’ll own. I now can be an employee of my LLC without penalty. I don’t know how all the laws work with taxes and all that stuff.

I’m assuming each state may vary, right?

Yes. The rules in each state as far as legal entity and what you’re allowed to be based on your legal entity is different by state.

Gotcha. I’m seeing that common in dentistry though, where they have an LLC or PLLC, or PC and then they have an S corp, just like I do, that’s over it.

It’s like the umbrella organization. It that how it’s set up for you, Ben?

Yeah. I don’t know how it all works, but the income I get, lets say from another company that’s not tied to what we do at Veritas, we set up a separate LLC and earn money off of that. The main S corp has either 100% ownership in the LLCs, or shared ownership, but the S corp is what we use for our filings, my tax filings. I don’t know how it all works, but in the end … Honestly, I don’t know if I’m doing it efficiently. How can business owners use their CPA in a way to make sure that your structure’s right and that you’re maximizing every single tax write off opportunity that’s out there?

Well, you need to communicate with them, and they need to communicate with you. If you’re trying to communicate with them and they’re not communicating with them, there’s a wonderful thing out there called the internet. You need to find somebody that’s going to be able to communicate with you, because like I said, it’s all about the communication and the planning.

Right. Let’s see. Sorry.

The next question I have here … No worries. How can business owners use their CPA to their advantage.

I’m a broken record here.

Hey, that’s a good thing. We learn by repetition.

You want to give him information. Communicate with them so that they can really help you plan and figure things out so you can be more efficient and keep what you make. It is a broken record, but it really does come down to keeping the lines of communication open.

Yeah. I think that makes sense. As a business owner, sometimes I don’t know where to start though. I don’t know what to communicate to them other than … They have access to our Quickbooks. What should you be communicating to them in terms of like things that would affect taxes for instance?

What you need to communicate is, things that you want to do. Hey, how can I make this tax deductible, legally? Can I pay my kids? Is that legitimate? Can I set up a medical expense reimbursement plan? Am I allowed to have a home office? How does that work? Does a home office allow me to write off other things? How do I maximize all the different things I’m doing so I get the greatest tax benefit that the law allows me to do?

Do most CPA firms have bookkeeping services, or is bookkeeping separate from a CPA firm, mostly?

It depends on the firm. I would say the vast majority probably do not have bookkeeping services. We actually have a bookkeeping service that we offer. When we work with a client, we do everything from A to Z.

Yeah. Awesome. I think that’s key because wouldn’t you want to know … I’m just trying to think about how to help our listeners. Even from my perspective if my CPA is also doing my bookkeeping, I’m sure when they see an expense, they’re going to want to come to me and learn more. And say, hey, they’ll ask. I used to have a bookkeeper and I’m thinking about rehiring him, who did all of my bookkeeping. He would always ask me … He was a CPA, but didn’t do tax work. All he did on the side was bookkeeping.

… bookkeeping.

He would ask me a million questions about an expense. You’re claiming it as this, what as it for? Did you do this? Did you do that? Who was involved? Then he would go in and categorize it as a certain expense category. In terms of communication with your CPA, is that along the lines of what you’re talking about in terms of asking questions about certain expense statements that come off of your business credit card?

Right, exactly. Those are conversations we have during our monthly meeting. Sometimes we’ll send an email, or a text, depending on how we communicate with that person. But those are definitely those open items you have. If you don’t communicate with the person until February or March, and he has these questions, are you really going to remember what you did last January?

No.

I can’t remember what I did last week.

Yeah. I can remember what I did in 1986.

Well, you’re one of the lucky few.

I’m just teasing.

Then again, you weren’t born. You weren’t around in ’86.

Go ahead Ben.

So the message I’m getting here, I think which is a key one, which is something that I don’t do. I don’t communicate with my CPA regularly.

No. I have to get better at that.

It’s maybe once a year, or twice a year. But, I do communicate with my bookkeeper almost daily. In terms of how that translates over the CPA side, I don’t know. But the biggest question I have in my mind now is, am I utilizing all the legal tax write offs that are available for my type of business structure? My guess is, probably not.

Probably not from based on my six years of doing tax planning, I would say, I don’t think I’ve come across anyone that’s been doing even the basic things. You want to talk about some of the real basic stuff that people should be doing?

Yeah.

Yeah.

Yeah. I want to know.

We’ve talked about, and beat it over the head, failing to plan, and the wrong business entity. I think a ground ball should be the retirement plan. There should be some type of retirement plan. That’s also a good way to keep good employees. How about hiring your kids when they’re old enough? We typically don’t recommend that our clients hire their kids until they’re at least 11 years old. But there’s actually the tax court has upheld hiring your children as young as seven.

Oh, so two more months for my son.

… getting a job in two more months.

Yeah. No more slave labor, Jordon.

The way that works, lets just say that your child is going to ski camp. It’s going to cost you $3,000. I’m just making up numbers here.

That’s an awesome ski camp.

Right. Right. Or private school, lets just say a private school, and it’s going to cost you $6,000. Let’s make that expense deductible. Let’s put that kid to work. Let’s document what that kid is doing. Let’s pay them, let’s say, $500 a month. They’re coming in every Saturday, and maybe a couple hours during the week. There’s something that they’re doing, and they’re paid reasonable compensation. That money goes into their bank account, and the dentist now gets a deduction for what they’re paying the child. The child doesn’t make the $6,500 number, so he pays no taxes. The school debits his account every month, or once a year for the tuition. So, you just turned that tuition into a tax deductible expense.

Wow.

If you have two kids, that could be $6,000, $10,000. Another thing is the home office. All right?

YOU SHOULD REVIEW THE THE NEW TAX LAW CHANGES WITH YOUR CPA BEFORE IMPLEMENTING ANY TAX PLANNING STRATEGIES.

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