The Tax Cuts and Jobs Act is Law
Five critical things to know about the new tax law.
The new tax law was signed last Friday morning. This new law favors business income over wages. Having your own business make more sense than ever. The new law does not simplify taxes for all filers. We think you are going to need an accountant to fully protect your earnings and develop long-term strategies.
Here’s what we have learned and feel is critical.
100% Expensing on new equipment is in effect now.
No more graduated multi-year depreciation. 100% expensing on new equipment became effective immediately upon signing. You can write off an equipment purchase on your 2017 filing if it was purchased after September 27, 2017. If you need this write – off for 2017 call today and we can get funding on equipment financing started.
Business income is better than wages.
The new law clearly favors business income over wages. In other words, it’s better to have a business than a job, but you already knew that. Owners of pass-through entities (sole-proprietorships, partnerships, LLCs, S-Corps) will be able to deduct 20% off the top of their income. There are limits and qualifications and there are special formulas that mix wages and business income – you are going to need an accountant to decide how to maximize this deduction.
C – corporations will see their rate drop to 21% starting in 2018. Quite a drop from the recent 35%. While few paid the full 35% now more businesses will choose the C-corp because the lower rate makes it much easier to realize greater profits.
Expect more incorporations and multi-entity businesses.
Because of the preference for pass-through businesses we expect to see many more incorporations. The new lower C-Corp rate of 21% will encourage incorporations for these businesses too. We expect to see many one man or small number of employee businesses formed to maximize after-tax incomes.
We also expect multi-entity businesses are on the horizon. Think of a business creating a separate entity for their real estate holdings, nothing changes fundamentally but paying rent goes to a pass-through that can then realize benefits. Other scenarios could see a business brand or name as a separate entity that licenses the use back to the affiliated or parent company. Multi-entity, parent, and holding company scenarios will no longer be for major corporations, we’ll see these practices emerge for small businesses, particularly those held by families and partnerships.
Think big picture and long term.
As your business grows you will need to spend more time on planning and thinking long-term. This new tax law should cause you to look at the big picture. Where your profits remain is where your wealth accumulates: your pass-through may be good for growth but long-term benefits may require a C-corp when your income grows beyond your needs or you are looking to sell.
The new tax law will see business owners and entrepreneurs well rewarded – those that take the time to learn and plan with an accountant will keep more of what they earned with the ability to protect their wealth as it grows for generations. We believe that the opportunity has never been greater.
Time for growth funding.
Now is also the time to learn about debt and how to use it to grow. Growth from retained earnings or boot-strapping is not bad but in today’s business environment things move fast. We believe this new tax law will usher in the greatest time for small business in history. We want to help you grow. Contact us today so you have the ability to act with the knowledge that your capital needs are ready and accessible. At Dynamic Capital we do it all: low rate merchant advances (MCA), fast and easy SBA loans, inventory financing and loans, business line of credit and even business credit cards.
Call today at 1-800-853-5110, complete one simple form, then choose from over 100 funding options. We always use a soft-pull on your credit to protect you. The new era of small business started Friday December 22, 2017, your future starts with small business capital from Dynamic Capital.