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Why Small Businesses Make Use of Professional Accountants

Posted on August 8th, 2017

Many current or prospective small businesses owners question whether they need professional accounting assistance. During the initial start-up phase of business ownership, entrepreneurs are often able to accommodate their business bookkeeping needs, causing them to wonder what benefit an accountant serves at various stages of the business cycle.

At Michael M. Parto An Accountancy Corporation, we are committed to providing new and experienced business owners with the support to achieve long term success in their venture. Consider what a tax and accounting firm can provide to your business, whether you are just starting or continuing pre-established operations.

Assistance New Ventures

Stepping off on the right foot is highly important to the long term success of any company. Professional accountants ensure new business owners know the options available to them when selecting their operational entities. They can help determine which structures will limit personal liabilities or can help you take on additional partners.

Accountants are also beneficial while restructuring an existing business. Depending on the sort of growth that business owners are looking to achieve, choosing a new or different entity can prove vital to financial well-being. Professional support helps identify the most beneficial entity for a business and assist in the expansion of operations to accommodate the growth of your company.

Establishing Internal Controls and Accounting Structures

Fraud prevention of allows business owners to maintain the safety of their finances and, in many cases, the personal information of their consumers. A professional accountant establishes internal controls to effectively reduce the chances of fraud. With this assistance, accounting operations can also be created to the regular bookkeeping and financial tasks. If these operations are already in place, it is possible to have them reviewed to maximize their efficiency and reduce any redundancies.

Effectively Lowering Tax Liability

With setup or restructuring accomplished, it is necessary to work throughout the year to develop and implement strategies for reduced taxation. This can come in the form of planning for charitable donations, depreciation, or capitalizing on standard and industry specific credits. These services give business owners the opportunity to ask about purchases and sales before they are performed to adapt their plans.

To learn more about what a professional accountant can do for your current or future business plans, contact our Hancock Park accounting firm today. Michael Parto is committed to providing companies with the support necessary to achieve their immediate and long term financial goals.

Possible Upcoming Changes to the Tax Code

Posted on July 28th, 2017

The 2016 elections brought a number of changes that are yet to be fully realized by the American taxpayer. At Michael M Parto an Accountancy Corporation, we are committed to staying up to date with the changes to the tax code as they occur, providing our clients with professional tax planning and preparation that best meets their needs.

We have created this guide to help clients understand the potential changes that may affect their current and future tax liability.

Closure of the Carried Interest Loophole

This allows the managers of private equity funds to treat their earnings as long-term capital gains, rather than regularly taxable income, thereby reducing the amount that can be taxed by at least 50%. The closure of this tax loophole generally has bipartisan support, and would likely affect those whose income is generated from the management of private equity.

Reduced Corporate Tax Rate

Corporate taxes are higher in the United States than in most other countries. With the Republican control of the house, the senate, and the executive branch as of this blog’s publishing date, it is likely that these tax rates will be lowered in an effort to generate greater investment into the economy, and to create new job opportunities. This may allow many smaller and mid-sized businesses to reap a greater percentage of their gross profits. This amount of revenue will hopefully allow businesses to take on new employees and expand their service base.

Repeal of the Estate Tax

The estate tax, also referred to as the death tax, is currently applied to those whose combined gross assets and taxable gifts equal $5,490,000 or more. The repeal of this law would allow individuals of high net worth to pass on their savings to a loved one, without having to worry about a portion being absorbed by taxes, and would change many individuals’ current estate plan.

Simplification of Tax Brackets

There are currently seven tax brackets into which individuals fall, though the current administration is looking to reduce this number to three. While this would make taxes less complex, in practice, this would likely increase the rate at which lower and middle income households are taxed. Such an increase would encourage further planning for annual taxes in order to keep the regular liability manageable.

To learn more about how potential changes to the tax code can impact your personal and professional liability, contact CPA Michael Parto today. We are committed to providing tax and accounting services that help you to achieve your personal and professional and financial goals.

Understanding Pass-Through Entities

Posted on July 14th, 2017

When beginning or expanding your business, understanding entity structures is essential to ensuring you can maintain steady profits and limited tax liability. At the Hancock Park firm of Michael Parto, we provide businesses owners with the insight and support necessary to understand and choose the right business structures.

With pass-through entities being one of the most beneficial options available to new and existing business owners, we have created this guide to explain how they differ from traditional businesses and corporate structures.

How Pass-Through Entities Benefit Business Owners and Shareholders

Pass-through entities, also known as flow-through entities (FTEs), sidestep the problem of double taxation that many corporations experience. Structures such as sole proprietorships, partnerships, limited liability partnerships (LLPs), and S-corporations are all considered flow through entities.

These businesses are not subject to double taxation as traditional corporations, as there is little to no distinction between company profits and the earnings of the shareholders or owners. For these businesses, structures are similar to corporations but they do not experience the same level of taxation, and shareholders gain a greater amount of income through dividends.

Certain FTEs make a distinction between the financial responsibilities of the business and those of the owner themselves. If the business should experience a significant loss, or cannot repay a debt, the proprietor is not liable to cover the expense.

Potential Downsides to these Structures

While FTEs are greatly beneficial to small and mid-sized businesses, they are not always ideal for large companies. Entities such as LLCs and S-corporations are limited in the amount of shareholders that can join the company, which hampers potential growth should your company go public. .

Though some pass-through entities protect the business owner from personal responsibility for company losses, many others make no distinction between personal and professional finances. Sole proprietorships and partnerships leave owners liable for the debts of the business and can damage the credit of an individual if the venture does not pan out.

Let Michael Parto Help you start or Grow Your Business

The key to establishing and capitalizing on a flow-through entity is enlisting the understanding and experience of a professional. At the Michael M. Parto An Accountancy Corporation, we provide clients with the insight necessary to claim financial success in the near and distant future. Contact us today to schedule your initial consultation.