Separating Business and Assets: Tax Savings and Liability Protection

A important business liability protection strategy is to divide your business assets by placing your business in one entity and your equipment and/or building in other entities.

Let me illustrate this by using an example. One of our clients owned a pest control business. They had been in business for many years. The business had two locations in two different counties. They put each location in a separate business entity. The buildings were placed in separate LLCs. Their trucks and spray equipment were put in yet another separate LLC. Doesn't that seem a bit much? It definitely created a lot of bookkeeping work.

One day one of their employees made a mistake while mixing the chemicals and a little girl got sick. Luckily she fully recovered, but the parents were angry and filed a lawsuit . The company had a perfect reputation and felt bad about the error and wanted to be fair to this customer.

However, the parents had dollar signs in their eyes . Long story short , because they had strategically placed their assets in separate entities , the suing parents were only able to go after one corporation . They received compensation for their daughter's illness, but were not able to take everything the company owns and the company was able to recover—with extra precautions in place, of course. The moral of the story is that separating your assets gives you liability protection and the opportunity to save your company's reputation.

Separating your business and assets can not only be a liability protection but there can be some tax savings as well. For example, if your building and business are in separate LLCs, you can use your business's income to pay rent to your building LLC. By doing this you can avoid paying Social Security and Medicare because rental income is taxed differently than business income.

There are several tax deductions that you are probably not taking advantage of. There are even some tax deductions that your tax preparer may be missing. Visit http://avoidbeingaudited.com to learn about a 12 CD set that will help you discover how to utilize this tax strategy of separating your assets as well as many other tax saving secrets.

Article Source: http://www.newsarticlessite.com

The team members at Soulence Tax and Accounting are experts when it comes to separating business assets LLCs and S Corps. To discover more about this and other tax saving options available to you, visit this website avoidbeingaudited.com.

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