I own a successful company, run by someone who doesn't know what he's doing!

Discussion in 'Growing and Managing a Business' started by RoundBrick, Aug 26, 2014.

  1. RoundBrick

    RoundBrick
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    Unfortunately, I think it might be time to find a new CPA. I've been working with him since I started my company in 2012. Back then he was very good at explaining things to me, but not so much anymore.
    I think these are pretty basic questions, so bear with me please. For reference, gross income was $26k for 2012, $38k for 2013, and is $33k for 2014 so far. I have very low overhead, and I’ve always worked another job to cover personal living expenses.

    Taxes

    I'm a resident of/reside in a state with fairly high personal and business income taxes. Every amateur that thought they knew something about business told me that I should incorporate in Nevada, so in 2012 I incorporated as a Nevada LLC. The company is web-based, mostly providing free online services and resources to a specific group of people, in a specific region of the US. The 2012 and 2013 taxes for the company were paid in a pass-through manner.

    Question 1: If I was incorporated in my state, would I have had to pay any additional taxes, since it passed through me and I’m a resident here? I'm thinking in this situation I saw no benefit by being setup in Nevada versus my state.

    At this point I was not taking a paycheck/draw from the company; it was all sitting in a business savings account. I spoke with my CPA after paying my 2013 taxes, and he recommended that put $5500 in an IRA, for a tax deduction, and that I file for my S election, which I did.

    My understanding is that the benefit of the S election is to reduce tax liability for myself and the company, but the explanation of how this works was not made clear. From what I’ve gathered on the internet, it’s still a pass-through setup, but I now pay ‘different’ taxes? I specifically asked him whether I had to operate the business differently, and he said no. Reading online, it looks like that’s not true, and that I need to hold meetings, keep minutes, etc. If so, I’m really questioning whether the S election was the right choice for me.

    Question 2: Am I now going to see the benefit of the Nevada LLC, since they have no income tax?



    Paying Myself

    Since I hadn’t taken a regular paycheck until January 1 of this year, a fairly large amount of money was accumulating in our business savings account. My CPA was surprised to hear this, in July, and explained to me that since I had already paid taxes on it, that money was mine, and that I needed to transfer it to myself to protect it. The balance of our accounts was around $29k. I transferred $15k to myself in cash and $5500 into an IRA.

    Question 3: When should I have transferred this “excess” money to myself?

    Question 4: I categorized this as a Member Draw in QuickBooks, is this correct?

    Now that I’m an LLC filing as an S-Corp, I’ve been taking a small salary of $600, on the 1st and 15th of the month, paid via check from the company checkbook, and still categorizing it as a Member Draw.

    Question 5: How should I be paying myself?

    Question 6: How should I categorize it in QuickBooks? Is this when I need to utilize the ‘payroll’ features?

    Question 7: I haven’t been withholding taxes, or paying them as I go. Aren’t I supposed to be doing this quarterly? I have been saving a sizeable amount in our savings account with taxes in mind. What’s the best way to do this?

    Question 8: Am I now considered an ‘employee’? Do I need to issue myself a W2?




    Business Addresses

    I use a registered agent service for my Nevada address. Though I’m not positive, I pay them because I think I need to have a physical address in the state. I have a PO Box here, and I also have my home address.

    Most of my business accounts are associated with the PO Box, unless for some reason a PO box can’t be used, in which case I use my home address. This *might* only apply to my state for pass-through income taxes and Nevada for the officer listing, but I can’t remember. I’m a little concerned about my privacy.

    Question 9: Is there any way around having my home address listed, if I’m an officer/member of the business?

    Question 10: Would I see any benefit in switching from a PO Box to a mail forwarding service?

    I really, really appreciate the help guys. I’ve stumbled through it this far, but I’d really like to learn how to do things correctly.
     
  2. RoundBrick

    RoundBrick
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    I know this is a lot to ask all at once. If any of you can answer the questions individually, even one, I'd appreciate it!

    I believe I've found the correct answers to these questions:

    Question 5: How should I be paying myself?
    Answer: I've been writing myself a check, then categorizing it as a member draw. I need to set myself up on the payroll, since payroll and a draw are two different things.

    Question 6: How should I categorize it in QuickBooks? Is this when I need to utilize the ‘payroll’ features?
    Answer: I should be setup as an employee, using the payroll portion of QB.

    Question 8: Am I now considered an ‘employee’? Do I need to issue myself a W2?
    Answer: Yes and yes.
     
  3. MikePeterson

    MikePeterson
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    Take that company on your name, take all the power of attornys and do all the work of that company according to you. If you think that the present procedure is not working, change it all.
     
  4. RoseAb

    RoseAb
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    You need to get yourself some better advice.
    Your CPA is telling you almost nothing.
    It will cost you something for sure. Have a first consultation meeting to find out how much information that person will tell you. Probably, you should get huge information from first meeting.

    One thing I know, you should have been paying taxes some how. It appears you CPA though you were because he told you to withdraw those funds.

    I would say you have a big confusion but not a big problem, but you should do something about it.

    A good business attorney might also be a good consultant for you. There are plenty of people that specialize in helping you set up your business type.
     

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