Cellular Phone Dealer/Appliance Dealer Rings Up Tax Savings

ITA clients are a husband and wife who jointly own an unincorporated business, with annual revenues of approximately $700,000: selling cellular phones and appliances. The owners future plans include expanding their operations to become an internet service provider. Personal assets include farmland and related property. No will or estate planning was put in place.

Operating the business as a sole proprietorship, our clients were exposing themselves to unlimited personal liability. In the event of a claim against the company and a rendering of an unfavorable verdict in litigation, all assets could conceivably be attached to satisfy the court judgment. The owners were willing to reduce their personal income to reinvest in the business and to keep from paying taxes in the near future.

Our recommendations included forming a new multi entity business structure, enabling them to adequately segregate and protect their assets while at the same time providing flexibility with regards to tax planning. ITA also recommended that the owners create a limited liability company (LLC) to hold the personal farm property which provided asset protection.

The first year tax savings for the business was more than $6,000, with a five year total savings of more than $30,000. The first year tax savings to the client equaled $20,980 and contributed to a five year total savings of $106,391.

Additionally, ITA recommends regarding the creation of wills and the implementation of other estate planning strategies for our clients resulted in the elimination of approximately $40,000 in probate fees.

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