#231: Tactical Tuesday: How to Structure your Business & Leverage Tax Benefits

OVERVIEW:

Jason A. Duprat, Entrepreneur, Healthcare Practitioner, and Host of the Healthcare Entrepreneur Academy podcast, talks about the importance of understanding taxes to structure your business for tax advantages so you can pay yourself more. He shares options for how business owners can structure their businesses and highlights which option will provide the most benefits in terms of tax savings.

 

EPISODE HIGHLIGHTS:

• You have options when it comes to how you pay yourself as a business owner and subsequently, the amount of tax you pay. This is based on how you structure your business. 
  
• One option is a sole proprietorship and the other is an S Corporation 
  
• You can also run your business as an LLC yet if you do, you’ll want to consider filing an S Corp election (Form 2553) to take advantage of tax benefits.
  
• As a sole proprietorship, you would pay taxes (income and FICA) on all of your earnings. This includes Social Security at 6.25% and Medicare at 1.45%. This is paid at the employee level and the employer level so a total of 15.4% is taken out.  
  
• In 2022, a cap was placed at $147,000 in income. So you would pay taxes on this maxed amount which equals $22,000.  
  
• As an S Corp, you can take advantage of huge tax benefits because you can pass-through income from the business to owners or shareholders. 
  
• In this type of business structure, the owner would take a reasonable salary. What’s deemed reasonable is up for debate and based on the risk the owner can take. 
  
• Be sure to talk with your CPA in order to determine the salary you should pay yourself. 
  
• Jason shares an example of generating $300,000 in income and taking a $100,000 salary. The tax on this at 15.4% comes to a little over $15,000 - substantially less than the sole proprietorship.   
  
• Jason runs all of his businesses as S Corps to take advantage of the tax benefits. 
  
• As a business owner, you have to decide for yourself how best to structure your business. However, in order to do this, you must first understand how taxes work. 
  

 

3 KEY POINTS:

1. When it comes to structuring your business, you have options and there are tax benefits associated with each option. You can file as a sole proprietor, S Corp, or an LLC with an S Corp election.
   
2. Hire a CPA. If you try to do this yourself…you’ll pay way more taxes. Consult with an education advisor to help you work in your best interests as a business owner.  
   
3. The two-tier tax system of the government works to incentivize businesses and growth because that's what supports the economy. As business owners, you can benefit from this if you understand how taxes work. 
   

 

TWEETABLE QUOTES:

“When it comes to answering the question, how should you pay yourself as a business owner, understanding taxes is extremely important.” - Jason Duprat

 

“You don't actually have to be an S Corporation; you can be an LLC and you can file a form that allows you to file an S Corp election, allowing you to pass through the income from the business to the owner.” - Jason Duprat

 

CONNECT WITH JASON DUPRAT:

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RESOURCES:

• Sign up for one of our free business start-up Masterclasses by heading over to https://healthcareboss.org/masterclass/
• Have a healthcare business question? Text me at 386-284-4955, and I’ll add you to my contacts. Occasionally, I’ll share important announcements and answer your questions as well.
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