When you think of visiting a lawyer or filing a tax return, you probably assume that each entity will cost you money rather than save you money. A consultation with a lawyer can cost upwards of $300 per hour. Filing an income tax return may result in a refund, but either way it can be costly, as well as aggravating.
But, there is a candle burning bright if you believe Larry Oxenham.
Oxenham is a senior legal advisor for the National Foundation for Tax Planning & Asset Protection. He spoke before the Quality Service Contractors (QSC) Power Meeting XXII in Savannah, Ga. His seminar was titled "The Latest Cutting Edge Strategies on Tax Reduction, Lawsuit Protection and Estate Planning." In essence, Oxenham told attendees that they either had a financial plan to secure the future of their business and personal assets or they had a financial plan to pay more taxes to the Internal Revenue Service (IRS) and make lawyers richer.
He said that most things you do in your business - 99 percent, in fact - do not require a lawyer. Business owners can set up their business, such as a C-Corporation or limited liability company (LLC), if they can navigate through the necessary business forms and publications. By this time, Oxenham had the audience hooked and wanting to hear more information. Less "meddling" by lawyers? Tell us more!
Oxenham said that business owners aren't represented well by lawyers anyway. He pointed out that fewer than one lawyer in 10,000 specializes in asset protection. "So what are all of the rest of them doing?" he asked. "Sucking the financial life out of you."
Minimizing TaxesOxenham explained the differences between LLCs and S- and C-Corporations. He said LLCs are the easiest to set up, yet offer unknown protection against lawsuits and limited tax deductions. Despite the drawbacks, he said LLCs are the most common business form in the United States.
On the other hand, a C-Corporation allows for the most tax deductions, and he suggested that QSC members ask their accountants about setting up their firm this way. Tax deductions under a C-Corporation, according to Oxenham, include medical, dental, and life insurance, as well as depreciation on automobiles and equipment.
But he piqued everyone's interest when he said, "This is the best time in our lives to buy equipment because the IRS says that if it fits into their category [IRS Publication 179] you can write off up to $105,000 in 2005. But the write-off goes away on January 1, 2006."
He reminded people that they could write off travel to meetings, pension plans, boats/airplanes, even a corporate retreat. Oxenham said the IRS definition of a corporate retreat is "another home you purchased through the corporation for use by your employees." That deduction could be even sweeter if your family members "happen to be your employees," he added.
The one red flag about a C-Corporation is that there is little or no lawsuit protection built in. That is where the importance of asset protection comes in.
Watch for my follow-up story on Oxenham's seminar, along with forms and publications you need to read.
John R. Hall is business management editor. He can be reached at 734-464-1970, 248-786-1390 (fax), or firstname.lastname@example.org.
Publication date: 03/07/2005