Setting up a side hustle? Main hustle? It’s your last chance for entity formation this 2019. Set up your LLC, Corp., S-Corp. this November.

It is now evident, that the ’18 Tax Cuts and Jobs Act (TCJA) favored corporations, small businesses, and the self-employed at the expense of employees.

Corporate tax rates were slashed from 35% to 21%, income from a business can be eligible for a 20% reduction before assessing tax, but employees are no longer able to deduct work-related expenses.

(In CA we can still take the unreimbursed employee expense deduction, but only at the state level.)

In the following three instances setting up an entity could make sense. If you generate income strictly as an employee and you need an avenue for tax write-offs if you have a business idea that you want to launch or if you are already operating as a self-employed individual.

For employees, now that we can no longer deduct unreimbursed employee expenses, an effective tax strategy is to have a “side business” in order to capture some write-offs. Review your skills set or hobbies for business ideas.  Who knows?  You may wind up supplementing your employment income or replacing it altogether.

You do not need to generate income in order to take business write-offs, but the tax code requires that you operate with the “intent to generate income”.  Therefore, it is important that you take measures to show that you are in business.   These measures can include the proper business setup, business bank account, website, promotional material, etc…

For those of you with a new business idea or already operating through self-employment, the right entity can provide asset protection, reduce employment taxes and reduce audit risk.   

We can help you determine whether forming a business entity is effective for you and the proper type of entity to set up.  We can review the entity requirements, setup and ongoing costs with you as well.

If you are considering entity formation, this is your final opportunity to set up an entity in ’19.  Depending on the entity of choice, the formation process can take up to four weeks assuming there are no setbacks.

Please call or e-mail Izaira@taxplus.com or Roxana@taxplus.com to coordinate a meeting, phone or video conference with our staff to review entity questions.   

Either Izaira or Roxana can set up your entities properly.