Everyone makes their New Year’s Resolutions. Usually they are of the personal nature – a few examples are to start jogging; lose a couple pounds, in other words to “A Little More of This” and “A Little Less of That”
One of the most profitable business resolutions you can make is to start out the New Year by converting your construction company to an S-Corporation because it could reduce your tax burden!
So how did you do? Were you up, down, or treading water which means you saw no real change from previous years? In 2012 did you have employees? Do you see growth in sales and profits in the coming months and years? Do you want to grow your sales and profits?
As the owner you are the most important employee in your construction company. Perhaps you became an owner because you didn’t want to be someone else’s employee.
Starting a brand new construction company is easy; open your business, get your Master Business License and your Contractor’s License. Ready, Set, Go, you are in business!
Start Marketing by, design business cards, get a website, talking to your friends and getting the word out. You make a few sales, buy material, fuel, paid your cell phone bill, figured out state and local taxes and paid them!
You even had “A Little or A Lot” of money left over. I’m hoping you had “A Lot” and a high net income as that is the purpose of being in business for yourself.
Most contractors set up their construction company as a Sole Proprietorship because it is quick and easy.
At the end of the year when it is time to complete annual Federal Tax Return (we have heard a lot about taxes lately) most contractors a bit confused never having filled out a Schedule C.
Most brand new contractors and a few seasoned ones bid the jobs, get paid and buy labor, material, subcontractors and other direct and indirect costs with cash, check, debit card, credit card don't keep all of the receipts.
As a Sole Proprietor you find out the "HARD WAY" that at tax time you are an "Employee” and whatever your “Net Profit” which is another word for “Net Income” is ALL subject to payroll tax!
Without a good clean QuickBooks Setup and contractor bookkeeping system it doesn't take long to figure out you are going to have a huge tax bill!
The most common method used by contractors and annual tax preparers is to add up all the deposits on your bank statement. This is also the most common numbers used for reporting to Department of Revenue, State Income Tax and IRS Returns.
By the way annual tax preparers are great at filling out forms and making sure you pay your fair share and more in taxes; however, they are the second most worst people on earth to do any contractor bookkeeping! Second only to the Bad Bookkeeper!
If you need someone to prepare your annual taxes contact Sharie 206-361-3950 or Sharie@FastEasyAccounting.com and she can refer you to someone best suited to your needs. We do not prepare annual tax returns, just Quarterly tax returns, B&O Tax returns, sales tax returns, L&I Quarterly tax returns and more.
In some cases being a sole prop make the most sense. It really is something you should discuss with your Board of Advisors (if you don't have a Board of Advisors contact us ASAP!) as they see your “whole” financial situation and are the people you already know like and trust.
You become an employee of your own company then you decide what your salary (or wages) should be. Whatever that number is, which should be reasonable, that is what you owe payroll taxes on. Remember, YOU are the MOST IMPORTANT Employee in your construction company and an S-Corp has other benefits beyond payroll tax savings.
As an S-Corporation, You are taking control and managing your business for increased growth and profits. You still have to pay taxes on your income the question is do you want to pay payroll taxes on ALL of It? Is your construction company an expensive hobby with low income (by choice or due to an artificially manipulated economy) or are you seeing a better 2013 and are looking for ways to be more efficient with your Business Process Management (BPM) and more productive with your time and resources?
What size of jobs are your favorite ones? Do you have a few large jobs, some medium sized jobs or many small ones? All types of jobs can be profitable but not for every contractor.
What is the focus of your business? Is it New Construction, Remodel, Small Repairs, Service Work, and do you know which ones work best for you? Good accounting records combined with Business Process Management (BPM) can help provide answers for making decisions. Work smarter, not harder and we can show you how. Click here to learn more...
Effective construction company owners know which parts of your business only you can and should be doing and which parts to give to someone else. Every piece of paper has a story and your mind will replay that story over and over again which is why it is important to have someone else doing your contractor bookkeeping so you can focus on operating and growing your construction company sales and profits.
We can help with the contractor bookkeeping and contractor accounting side so that you can do what you do best. Our niche is the smaller construction contractor.
Our focus is in construction accounting and everything about your construction business. We use and recommend QuickBooks as it is one of the most commonly used software with reports that are easily understood by bankers, financial advisors and tax accountants. Our scope of work is all the business transactions year round, not just April 15th and maintaining the financial reports including your construction company Profit And Loss Report, Balance Sheet Report and Job Costing Reports you need for your construction company.
We can set up QuickBooks file / Cleanup QuickBooks existing file / customize invoices / process payroll / financial reports. We help “A Little or A Lot” depending on your needs. We provide ongoing services as needed. Your paperwork doesn’t have to be perfect! And we can solve that “To Do” pile.
Please call me when you get a chance for a quick chat. (It’s FREE) You can never be “Too Small” (we have many one person companies). Concerned about being “Too Big” – well maybe if you have a “Zillion of Places, People or Things” How will either of us know unless we chat? I look forward to meeting with you on the phone and in person (if you are able to visit our office in Lynnwood Washington) I can be reached at 206-361-3950 – Thanks, Sharie
About The Author:
Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. http://www.fasteasyaccounting.com/sharie-dehart/