Tax considerations can be a minefield for small and medium-sized businesses. Mark Johnson is unique among Atlanta attorneys in having earned three valuable graduate degrees. In addition to his J.D. law degree, he holds an MBA in finance and a postgraduate LL.M. (Master of Law) degree in taxation. As a highly educated and experienced tax attorney, Mark helps businesses navigate the taxation issues and responsibilities faced by the businesses and their owners.
There are even more taxes for which your business may be responsible, such as property tax, capital gains tax, and franchise tax. Let Mark Johnson help you plan and manage your tax liability. For a free initial consultation to discuss your specific needs, please call Mark A. Johnson, PC, or contact us online.
“Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.” - Judge Learned Hand, Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934)
Transactions often carry with them tax implications. The way the documents are structured can mitigate, reduce, or even eliminate taxation completely. Not only is it essential that contractual and legal rights be negotiated and protected, and that responsibilities be clearly defined and consequences be delineated, but there is no obligation to overpay taxes when recognized and sanctioned alternatives are available which reduce taxes. These alternatives include:
Business Structuring: Incorporating a business provides protection against personal liability, but the analysis does not end there. Corporate income is generally taxed twice—at the corporate income tax level, as well as on distributed income at the personal income tax level. But options are available to eliminate the corporate level of taxation by treating the business entity as a partnership for taxation purposes. Limited Partnerships, Limited Liability Companies (LLCs), and S Corporations (formerly known as “Subchapter S” Corporations) are clearly recognized vehicles to eliminate the additional level of taxation.
Sale of Business: Is capital stock sold, or the specific assets of the business? The components of the business being sold generally have diametrically opposed tax consequences to the buyer versus the seller. Categories such as goodwill, consulting contracts, equipment, real property, and intellectual property have specific and differing tax treatments applied to them.
Tax Exempt Organizations: Qualifying Non Profit Corporations can obtain tax exempt status on their earnings and also tax deductibility for donations to them. These include religious, charitable, educational, and similar organizations qualifying under Internal Revenue Code Section 501(c)(3).
Qualified Retirement Plans: Are plans with significant tax savings implemented by a business that meet Internal Revenue Code requirements for the exclusive benefit of employees or their beneficiaries. They run the gamut from traditional defined benefit pensions to defined contributions plans such as 401(k) plans, profit-sharing plans and tax-sheltered annuities.
Cafeteria Plans: Are a type of employee benefit plan pursuant to Section 125 of the Internal Revenue Code, which allow employees to choose between different types of benefits, including health insurance, group-term life insurance, voluntary "supplemental" insurance (dental, vision, cancer, hospital confinement, accident, etc.), and flexible spending accounts through the plan. Employees' pretax contributions are not subject to federal, state, or social security taxes. Employers save on the employer portion of FICA, FUTA, and workers' compensation insurance premiums.
Two Trust and other Tax Adjusted Wills: Individuals have personal exemptions from estate and gift taxation, and the exemption amounts have been in a constant state of flux for 30 years. Estates which exceed the exemption amounts are taxed at rates beginning at one-third and rising to over one-half, particularly when passed to children and grandchildren. Use of trusts can assure that the personal exemption of the first spouse to die is not “wasted,” thereby effectively doubling the amount which can pass tax-free to younger generations and collateral relatives.
Utilization of Annual Gift Exclusions: Donors can make gifts to recipients annually of amounts up to the current gift exclusion amounts, which result in no gift taxation, and spouses can join in the gift so as to double the amounts passing tax free.