Finally made money now i have to give it away?

[JoshinNC]

where have you gone telecomguy?

Some of the posters have provided good advice, but trying to piecemeal it together without professional assistance would be a disservice. You would be best advised to work with a local professional who access to the things that you will need. You will likely need to work with several professionals (accoutant, attorney, investment advisor) to develop, implement and MAINTAIN a plan that is in your best interest. If you can give us an idea of where you are located in the country I am sure either someone on the board can work with you or put you in place with someone close to you.

[dsi]

As it has been said, find yourself a very knowledgable accountant and pay the appropriate fees for consultation. You are only cheating yourself if you don't.

[Lion]

Sit down with advisors

Sit down with advisors now, not in December or during tax season. Are you ripe to be a C-Corporation? Do you have a spouse &/or children to hire in whatever entity you choose? Consider a defined benefit retirement plan, expensive to set up but you can defer so much more. At least, step up to a 401(k) or SEP with higher limits than your current Roth IRA. A C-Corp would let the corporation deduct health care premiums and other fringe benefits without you paying self-employment or payroll taxes on most. Do you have an accountable reimbursement plan in place so qualified reimbursements don't get included in profits? Can you defer some year-end invoicing into 2008? And, accelerate purchasing into 2007? Have you used up all your prior year NOLs? Some of these are minor amounts or just timing, but until you choose which business entity meets your needs now and going forward, neither we nor your current advisers can help you structure your income and expenses to be subject to the least tax. What state are you in? You're going to need to invest in some business financial planning with a team of tax advisor, lawyer, etc. Invite them to serve on your board of directors. Talk to your friendly, local experts. (Friendly is not a requirement, however.)

[Bees Knees]

So far, Gabriele hit the nail on the head.

We often think of LLC and S corporation as the only choice. But in a case where a business strikes it rich with huge profits and only two owners to spread the wealth around (the business guy and the government), the C corporation is the way to go.

C corporations generally pay a lower rate of tax on their profits than individuals making the same money. The individual owner is not taxed until the corporation distributes profits. But in your case where the business wants to expand, the tax to the individual can be deferred many years.

Then once the business does start to distribute profits, it may be taxed at the lower capital gain rates for qualified dividends. Or if the business is eventually sold to mega corporation, the lower capital gain rates apply to the sale of the C corporation stock.

At any rate, whether it is a qualified dividend or long term capital gain on the sale of stock, the individual does not get soaked for the 42% rate as the business is earning profits. The combined corporate and individual rates may eventually add up to more than 42%, but that is after the business has had a chance to use the governments tax money for years in expansion.

[veritas]

Walter Williams

I have been reading his stuff online. By the way it's my latest source for quotes.

Boortz's agreement is OK & I like him, but he's an amateur.
I hope Thomas Sowell & Walter Williams would approve.

[thomtax]

Veritas

I love your signature line.

[veritas]

What was he thinking?

To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it."
-- Thomas Jefferson

[Golden Rocket]

Telecom Guy

Telecom Guy - you're getting a lot of sociological opinions, but only a few who have offerred real advice.

There are dozens of ways to save on taxes, but just like a CPA cannot install a satellite hookup, you can't do tax planning from a forum or from soundbytes. Find a good tax man or woman in your area. If you don't mind telling us where you operate, there are some 1500 members of this forum, some of whom may live in your area.

I've also heard so much of this "redistribution of wealth" via taxes that I've got to jump up and declare that taxes are only part of the story. Without taxes, redistribution of wealth already exists. The wealthy think they are supporting the masses with their tax contributions and providing jobs, but in fact they are also sucking wealth upward from those who have no choice but enter the foodstream at the bottom. Do you like paying $3.00 a gallon to big oil any better than you like paying taxes? Have you ever sought restitition from our court system? Big business is cutting health insurance at every opportunity, and without it two days in the hospital can wipe out your life savings. So hospital administrators, drug companies, doctors, etc. can live in a big house overlooking your town. And if you don't pay them, YOU'RE the crook! If you are in the cable business, does your town's cable company have competition? Maybe 20 years ago, but not now. Your dollars are also being sucked up by forces who have mastered the economy such that you have no choice other than to pay them, without meaningful competition.

Look at redistribution of wealth as a two-way street. There is more balance than you think, whether it's right or not.

[erchess]

O P needs a tax advisor

and in particular one who can draw up pension plans and incorporate a business. It should not be hard to find such an individual, and the fees involved will be inexpensive compared to the tax savings.

[JohnH]

Thanks

Boortz's agreement is OK & I like him, but he's an amateur.
I hope Thomas Sowell & Walter Williams would approve.

[JoshinNC]

well put

Obviously you are missing the main job of government as it's understood by most people in political power - to redistribute wealth based on the whims of those in power. They sincerely believe they know better how your money should be used that you do, so if you earn "too much" profit they believe it's their duty to tax it away from you and give it to someone else. These elitists justify this immoral behavior by convincing themeslves that they are smarter, wiser, and intellectually superior to you. But your last line needs to b changed. You are not giving the money away - it's being stolen from you through a system of legalized theft by people who dont understand the proper role of government.

neal boortz would be proud.

telecomguy, where are you located at?

[ED SMITH]

Look at a SEP IRA. You can sock away 20% of you income up to $45,000 tax deferred.

In addition to that, he can also have an individual 401K and put $16,000 into it.

[veritas]

I've been in business for 4 years and I have been operating at a loss for the past 4 years. I have finally started making money off of my business which should continue to grow over the next few years. However, it looks like we are going to have to give up at least half of the profit.

It could be you have some net operating losses which may used to offset some profits.

[veritas]

Not everyone would agree...

Anyone who thinks that wealthy people in this country are over taxed with a goal of redistributing the wealth should consider the number of millionaires we have. Conditions are right here for anyone who wants to work hard and build wealth. It has been obvious to most people since the time of the Civil War that the tax system needs to be graduated so that the wealthy pay proportionately more than the less well off.

When men get in the habit of helping themselves to the property of others, they cannot easily be cured of it."
-- The New York Times, in a 1909 editorial opposing the very first income tax

[Luis Mopeo]

LLC
I am the only owner,
roth ira,
just funds for business growth I don't spend much on personal,

Look at a SEP IRA. You can sock away 20% of you income up to $45,000 tax deferred.