I'm a one person office. Set up as an S-corp. My accountant suggested this. Want to know if there are any worthwhile books on tax and compensation stratagies for small design offices. (Under 100k sales.) Managing funds. paying bills, paying myself more importantly what to write off. My record keeping is simple all money flows into a business account and all bills get paid from there. Looking for others with small offices to relay experience.
Stay on top of accounts, I even selected projects that I knew would be paying, always somebody looking for a young gun looking to work hard for nothing. work comes in time if you do good work and don't think of jobs as a single project most clients have friends and business associates who might need help down the road. Even high profile locations ie corner lots are always something we take a little more time to do a good job of as they always have better appeal and general public relate to them more often even if it in their car. try and get a mix of project types ie commercial residential etc. so you don't just get pigeon holed into being the reno guy or something. try to generate jobs by putting people together, ie rich guy with cash looking for investment with land rich contractor with no cash. look to broker those deals and get the design work.
Work so far over tha last couple of years has been at steady pace. So no concerns there. But, recently I've incorporated and hold a business license. I want to maximize my take home pay. Not sure how to pay myself after the business has paid it's bills. Should it be weekly,biweekly, monthly etc. I guess the trick is to get paid a fair wage and at the end of the year recieve a bonus. Also, looking to use deductions, such as office supplies, cellphone,internet connection, home office deductions to minimize tax bill. My accountant is only so clear for relaying what items to deduct.
I guess I wonder why you became an s cororation then. I worked as a sole propietor until my business reached $3 million in sales. An S corp adds a layer of taxation and extra tax form to fill out at the end of the year, perhaps that's why your accountant suggested it. I guess you can deduct more of your health insurance, so that helps I suppose.
Anyway, you can deduct anything related to the business. If you work out of your house, you can deduct part of the rent/mortgage, part of the utilities, repairs, lawn mowing service, etc. You can deduct all equipment you buy for the office: computers, phones, cell phone, ipod that is kept in the office, camera, etc. You can either charge the office for mileage that you keep track of (including mileage you don't charge clients, like mileage to marketing events), or you can have the company own or lease your car. (you still only get to deduct a percentage unless you use the car only for business, and have another car.) You can deduct health insurance, disabiltiy insurance, life insurance. You can start a SEP (simplified employee pension plan) and don't pay taxes on amounts put away.
Just don't get stupid and greedy and start deducting your things that are not really business expenses. If you are audited, you will get huge fines. Be honest and only deduct things that are actually expenses, but you would be suprised how fast they add up.
You should pay yourself a decent wage regularly, and then what ever is left over at the end is a bonus. YOu can always take extra bonuses out during the year if cash flow is good. Make sure you do some preliminary calculations on what the taxes will be. If you make good money, the taxes at the end of the year on the 'bonus' will be significant. Leave some money in the company if you plan on growing. If you do plan on growing, set up your books now as if you are a larger company- you won't regret it as you grow. By that, I mean tracking things by category, keeping track of your billable and non billable hours by category (marketing, accounting, etc.), and dividing up thinks like postage as direct reimbursables versus regular office. This will help you understand your overhead numbers in the future. When I started, I hired a neighbor who was a stay at home mom, but had been an accountant/CFO for a big company. She set up my books for me in Quickbooks, and did all of the entries once a month.
I far as I know the taxation for S corp is the same as an LLC. That is the corproation is only taxed once at a personal level. C corps have double tax. Once for the corp and then again when you get taxed at the personal level. LLC advantage over S corp is larger # of employees that can be hired and larger number of shareholders. I understand not to be greedy or foolish about deductions. My accountant is good for letting me know about that. I wanted to ask here about deductions since others here operate their own offices and know the ropes.
Setting up your company as a sole proprietorship has its benefits come tax time, your personal and business taxes are done on the same form. Makes things much less complicated.
BUT if you are successfully sued which from time to time does happen in our profession, if you are a sole proprietor your PERSONAL assets can also be taken, because the business and you are one and the same in the yees of the IRS.
Incorporationg, setting up an S-corp or LLC will protect your personal assets if you are sued.
I read the book 'Tax Savvy for Small Businesses, definitely worth the $15 (or $10 used on amazon now). Plus, buying that book is a write off! aha!
At least in my state, if assets are held jointly with a spouse, they cannot be taken if you are sued. So your house, savings etc is protected even if you are not a coporation.
You need to get more info from your accountant, or switch accountants... S-corp accounting is quite a bit more complicated than sole proprietorship or partnership (we have both - 2 companies so I can compare the returns). In CA, there is a minimum tax of $800/yr for an S-corp - I assume it depends on your state. Even s-corps are taxed twice - if you have money remaining in the bank at the end of your tax year the S-corp will be taxed for it - this is why corporations try to clear out their accounts at the end of the year using various means.
I don't fully understand it either, but my basic understanding of the benefit of an s-corp (in addition to the liability protection, which only will hold up if you follow all the requirements for a corporation - filing meeting minutes etc. every year) is that you can pay yourself a salary (within a reasonable range), and everything on top of that can be a bonus, on which you do not need to pay self-employment tax (about 15%). For the first year, you can reasonably say that you have no salary and it's all bonus (officially called dividends, I think) because it's reasonable to the IRS that you wouldn't have much profit. I also believe that the IRS looks more favorably on certain deductions (like auto expenses) that go through a corporation rather than sole proprietorship or partnership. If you have a partnership or sole proprietorship, all your income is subject to the self-employment tax.
For deductions, you basically can take anything related to work - books, magazines, supplies, dsl, phone, museum entrance, cds for the office, etc. For meals, you can only take 50% of the value, and business must be the main discussion topic and/or you should be entertaining employees. Anyways, I've also got that tax savvy book, and would recommend something similar, but really the best source of info is your accountant and it's worth paying for an extra hour or two of time to get a clear understanding. In terms of your home office, you might not want to deduct a portion of your mortgage because it gets subtracted from your capital gain exemption if you sell the house (or something like that - my accountant explained it but that was one of the more complicated items). Also, if the office is not in a seperate building (ours is), then if you get audited they may question your deductions...
Anyone have any good suggestions for resources in setting up small businesses- books, gov. websites? Like most architects, I have no business training and it's killing me.
The AIA bookstore has a couple of good books on setting up an architects office, with specific advice for architects that is helpful.
Try to find a mentor who can help you thru things too.
is a FREE On-Line newsletter that publishes articles of some use to architects who want to learn more about practice management ... all articles published since inception are available for viewing in the archives
i'd check into it state by state - we went llc simply because it was easier paperwork and we could elect to be taxed either as partnership (on your net profit, regardless of how much you actually take home) or as an s-corp (you can carry money from year to year without taxation until it's taken as a payment of some sort - salary, bonus, or share distribution, which doesn't apply to an llc).
as far as resources - we use a couple of publications by pmsj, a financial consulting firm geared to architects and other design firms. don't have any of them in front of me, but they've been very helpful.
Well, I did find a book that focuses on Home business deductions
it's from NOLO publishing and answers alot of my questions. Actually, it's pretty simple stuff anything required to run your business can be considered a deduction. Cable, phone, office supplies, books cell phone etc,.
Now I just need to figure out how and when to pay myself
Feb 5, 06 9:06 am ·
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Small offices tactics
I'm a one person office. Set up as an S-corp. My accountant suggested this. Want to know if there are any worthwhile books on tax and compensation stratagies for small design offices. (Under 100k sales.) Managing funds. paying bills, paying myself more importantly what to write off. My record keeping is simple all money flows into a business account and all bills get paid from there. Looking for others with small offices to relay experience.
Stay on top of accounts, I even selected projects that I knew would be paying, always somebody looking for a young gun looking to work hard for nothing. work comes in time if you do good work and don't think of jobs as a single project most clients have friends and business associates who might need help down the road. Even high profile locations ie corner lots are always something we take a little more time to do a good job of as they always have better appeal and general public relate to them more often even if it in their car. try and get a mix of project types ie commercial residential etc. so you don't just get pigeon holed into being the reno guy or something. try to generate jobs by putting people together, ie rich guy with cash looking for investment with land rich contractor with no cash. look to broker those deals and get the design work.
Work so far over tha last couple of years has been at steady pace. So no concerns there. But, recently I've incorporated and hold a business license. I want to maximize my take home pay. Not sure how to pay myself after the business has paid it's bills. Should it be weekly,biweekly, monthly etc. I guess the trick is to get paid a fair wage and at the end of the year recieve a bonus. Also, looking to use deductions, such as office supplies, cellphone,internet connection, home office deductions to minimize tax bill. My accountant is only so clear for relaying what items to deduct.
I guess I wonder why you became an s cororation then. I worked as a sole propietor until my business reached $3 million in sales. An S corp adds a layer of taxation and extra tax form to fill out at the end of the year, perhaps that's why your accountant suggested it. I guess you can deduct more of your health insurance, so that helps I suppose.
Anyway, you can deduct anything related to the business. If you work out of your house, you can deduct part of the rent/mortgage, part of the utilities, repairs, lawn mowing service, etc. You can deduct all equipment you buy for the office: computers, phones, cell phone, ipod that is kept in the office, camera, etc. You can either charge the office for mileage that you keep track of (including mileage you don't charge clients, like mileage to marketing events), or you can have the company own or lease your car. (you still only get to deduct a percentage unless you use the car only for business, and have another car.) You can deduct health insurance, disabiltiy insurance, life insurance. You can start a SEP (simplified employee pension plan) and don't pay taxes on amounts put away.
Just don't get stupid and greedy and start deducting your things that are not really business expenses. If you are audited, you will get huge fines. Be honest and only deduct things that are actually expenses, but you would be suprised how fast they add up.
You should pay yourself a decent wage regularly, and then what ever is left over at the end is a bonus. YOu can always take extra bonuses out during the year if cash flow is good. Make sure you do some preliminary calculations on what the taxes will be. If you make good money, the taxes at the end of the year on the 'bonus' will be significant. Leave some money in the company if you plan on growing. If you do plan on growing, set up your books now as if you are a larger company- you won't regret it as you grow. By that, I mean tracking things by category, keeping track of your billable and non billable hours by category (marketing, accounting, etc.), and dividing up thinks like postage as direct reimbursables versus regular office. This will help you understand your overhead numbers in the future. When I started, I hired a neighbor who was a stay at home mom, but had been an accountant/CFO for a big company. She set up my books for me in Quickbooks, and did all of the entries once a month.
I far as I know the taxation for S corp is the same as an LLC. That is the corproation is only taxed once at a personal level. C corps have double tax. Once for the corp and then again when you get taxed at the personal level. LLC advantage over S corp is larger # of employees that can be hired and larger number of shareholders. I understand not to be greedy or foolish about deductions. My accountant is good for letting me know about that. I wanted to ask here about deductions since others here operate their own offices and know the ropes.
Setting up your company as a sole proprietorship has its benefits come tax time, your personal and business taxes are done on the same form. Makes things much less complicated.
BUT if you are successfully sued which from time to time does happen in our profession, if you are a sole proprietor your PERSONAL assets can also be taken, because the business and you are one and the same in the yees of the IRS.
Incorporationg, setting up an S-corp or LLC will protect your personal assets if you are sued.
I read the book 'Tax Savvy for Small Businesses, definitely worth the $15 (or $10 used on amazon now). Plus, buying that book is a write off! aha!
At least in my state, if assets are held jointly with a spouse, they cannot be taken if you are sued. So your house, savings etc is protected even if you are not a coporation.
You need to get more info from your accountant, or switch accountants... S-corp accounting is quite a bit more complicated than sole proprietorship or partnership (we have both - 2 companies so I can compare the returns). In CA, there is a minimum tax of $800/yr for an S-corp - I assume it depends on your state. Even s-corps are taxed twice - if you have money remaining in the bank at the end of your tax year the S-corp will be taxed for it - this is why corporations try to clear out their accounts at the end of the year using various means.
I don't fully understand it either, but my basic understanding of the benefit of an s-corp (in addition to the liability protection, which only will hold up if you follow all the requirements for a corporation - filing meeting minutes etc. every year) is that you can pay yourself a salary (within a reasonable range), and everything on top of that can be a bonus, on which you do not need to pay self-employment tax (about 15%). For the first year, you can reasonably say that you have no salary and it's all bonus (officially called dividends, I think) because it's reasonable to the IRS that you wouldn't have much profit. I also believe that the IRS looks more favorably on certain deductions (like auto expenses) that go through a corporation rather than sole proprietorship or partnership. If you have a partnership or sole proprietorship, all your income is subject to the self-employment tax.
For deductions, you basically can take anything related to work - books, magazines, supplies, dsl, phone, museum entrance, cds for the office, etc. For meals, you can only take 50% of the value, and business must be the main discussion topic and/or you should be entertaining employees. Anyways, I've also got that tax savvy book, and would recommend something similar, but really the best source of info is your accountant and it's worth paying for an extra hour or two of time to get a clear understanding. In terms of your home office, you might not want to deduct a portion of your mortgage because it gets subtracted from your capital gain exemption if you sell the house (or something like that - my accountant explained it but that was one of the more complicated items). Also, if the office is not in a seperate building (ours is), then if you get audited they may question your deductions...
Anyone have any good suggestions for resources in setting up small businesses- books, gov. websites? Like most architects, I have no business training and it's killing me.
The AIA bookstore has a couple of good books on setting up an architects office, with specific advice for architects that is helpful.
Try to find a mentor who can help you thru things too.
is a FREE On-Line newsletter that publishes articles of some use to architects who want to learn more about practice management ... all articles published since inception are available for viewing in the archives
You also may want to look into The Architect's Handbook of Professional Practice
John Wiley publishes a useful series called "The Architect's Essentials of ..." you might find this particular volume useful: The Architect's Essentials of Starting a Design Firm ... there's also a companion volume entitled The Architect's Essentials of Contract Negotiation that should be quite helpful to someone just starting a new firm.
so - Studio43 - how's it going ?
google prairie avenue bookshop and see what they got...
Work, work, Work....oh ya DESIGN LIKE IT IS YOUR VERY LAST PROJECT!
OH YA, AND INVOICE....AS MY PARTNER WIFE ALWAYS TELLS ME....GET THAT INVOICE OUT TODAY!
yeah, i never wait to get an invoice out.
very savy tax saving book by a former IRS agent:
http://www.amazon.com/gp/product/007140807X/103-7130121-9130204?v=glance&n=283155
studio -
i'd check into it state by state - we went llc simply because it was easier paperwork and we could elect to be taxed either as partnership (on your net profit, regardless of how much you actually take home) or as an s-corp (you can carry money from year to year without taxation until it's taken as a payment of some sort - salary, bonus, or share distribution, which doesn't apply to an llc).
as far as resources - we use a couple of publications by pmsj, a financial consulting firm geared to architects and other design firms. don't have any of them in front of me, but they've been very helpful.
Well, I did find a book that focuses on Home business deductions
it's from NOLO publishing and answers alot of my questions. Actually, it's pretty simple stuff anything required to run your business can be considered a deduction. Cable, phone, office supplies, books cell phone etc,.
Now I just need to figure out how and when to pay myself
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