Are you paying Uncle Sam more than you have to?
The insider secret saving interior designers thousands on their taxes
…and how to make it work for you!
What if you could save thousands annually in tax payments by doing something incredibly simple? A small, relatively easy change, with a massive payout come tax time. You’d want to know about it, right? In fact, you might be wondering why on earth your accountant didn’t mention it to you when you started your business.
I recently met with an interior designer who was looking for a new accountant. When we met, she was still seething about a bomb her accountant dropped on her. The designer owed nearly $20K in taxes to Uncle Sam.
The worst part? Her accountant didn’t explain to her how she could take steps to never, ever be in this position again.
Fortunately, I was able to ask her some questions and come back with a plan to save her a boatload of cash (to the tune of $15K!) the next calendar year.
Fact: The number one way to save money on your taxes is to structure your business correctly from the start. <<Tweet this>>
Some of the most common ways interior designers structure their business are:
LLCs: This is the most common way to structure your business if you want to keep your business and your personal assets separate. By definition, an LLC means “Limited Liability Corporation,” and as it sounds, if a client sues you it’s only your business that’s up for grabs, not your home and everything in it.
Sole Proprietorship: This is a structure clients seem to pick simply based on the name. When you structure your business as a sole proprietor, there’s no separation between your personal assets and your business liabilities. So, if you have a disgruntled client who thinks you’ve completely messed up the job and wants to sue you for everything you own, they can. And by everything, I don’t just mean your business… all of your personal assets are also up for grabs.
Partnership: A partnership is very similar to a sole proprietorship except there’s more than one person (the partners) who are responsible for all aspects of the business.
S Corp (or Corporation): When interior designers file as an S Corp or a corporation, they are subject to more formalities than with an LLC. An S Corp typically has shareholders, owners, and directors, is required to meet at least annually and more.
It’s important to remember that you can always change the way your business is structured. In fact, when you change your business structure the government considers it a brand new entity. As such, you’ll be subject to different (possibly much lower) tax liabilities.
If you think your business might be structured incorrectly, it’s time to get that figured out. When it comes to taxes, what you don’t know can hurt you.