Service Based Businesses

Service-based businesses should be properly structured not only to maximize tax benefits but also with liability and marketability considerations in mind. Initially, these businesses are usually structured as sole proprietorships and run as S corporations.

However, many successful sole proprietors don’t realize that they’re subject to both ordinary income tax and self-employment tax, which can result in overpayment of self-employment tax. Our expert guidance can help these businesses avoid paying more tax than they owe.

Larger service businesses that collect income in multiple states often encounter state tax apportionment issues. In addition, they often don’t understand the ramifications of commercial domicile in their home state.

The complexity of multi-state taxation results in many service-based businesses not taking full advantage of tax credits, and thus overpaying their taxes. Our experience in state tax apportionment helps ensure that service-based businesses neither underpay nor overpay state taxes.

Technology firms and software (especially SAAS) businesses must deal with complex self-developed software capitalization and expensing rules. They must determine if ongoing development costs are capitalized or expensed in the period incurred.

We are experienced in helping these businesses make the right determination in order to minimize tax liabilities. For example, these businesses usually benefit the most from using budgets and cash flow projections.