Effective tax planning can create meaningful benefits for businesses of all sizes.
You don’t need to be a multi-million-dollar operation to take advantage of smart tax strategies. In fact, smaller, closely held businesses often see significant gains simply by improving bookkeeping, restructuring entities, or implementing thoughtful long-term planning.
- Good tax planning allows us to predict a tax return’s outcome before preparation.
- It gives us some control over how much tax is due.
- It addresses short-term needs, like reducing tax bills.
- It covers intermediate goals, such as exploring capital gains treatment on business sales.
- It looks ahead to long-term strategies, including:
- Transferring the business to the next generation, or
- Selling the business outright.
Financial Planning
- We provide advice only—we do not sell financial products, ensuring no conflicts of interest from commissions or kickbacks.
- Our goal is to understand and support your financial objectives.
- Our expertise includes:
- Retirement planning
- Personal wealth management (ensuring you don’t outlive your resources)
- Family wealth management (giving your children a financial boost)
- Multigenerational wealth management
Multigenerational Wealth Management
- As a relatively new area for our firm, we’ve invested in legal expertise and established relationships with major financial firms. We’re actively learning the intricacies of this domain, and the insights have been valuable.
Specifics
Entity Formation and Growth
When a new business is formed, making sound decisions upfront is important. Historically, this was uncommon, but recently, our expertise in long-term tax planning has gained traction, leading to our involvement in mergers and acquisitions — a sector we thoroughly enjoy.
In the last decade, we have honed a method for carving out goodwill tied to intellectual property (IP). At the time of entity formation, it’s simple:
- Form an operating LLC to handle customers, revenue, and expenses.
- Form a separate property LLC to hold assets and IP rights.
There are no downsides to having multiple entities to operate one business. In fact, it provides liability protection, improves insurability, and eases transferability. In certain cases, more LLCs may be required to manage family or multigenerational wealth.
Managing Multiple Entities
For example, in the transportation business, a property LLC would typically own trucks, trailers, and equipment, which the operating LLC would lease. The same principle applies to intellectual property, where the operating LLC would pay royalties to the property LLC, establishing a valuable property right.
Growth Phase Structuring
Recently, a client in a similar industry sought our advice regarding a multi-location operation. With the profitability they’ve maintained, we helped them project tax savings of $8 to $10 million over the next five years.
In another similar case, we expect to save a multi-partner client in Georgia $5 to $8 million in taxes over five years. Both cases involve expansion plans designed for high tax leverage.
Extracting Wealth from Mature Businesses
Not all tax planning starts at the expansion stage. For established businesses, restructuring can still unlock significant value. Most new businesses aren’t structured ideally from the start. Carving out intellectual property later allows us to unlock the tax savings I mentioned. Recently, we have done this for a mature business in the transportation sector with excellent results.
While the examples above involve businesses with significant profitability, you don’t need to be a multi-million-dollar operation to benefit from smart tax planning. In fact, many of the most impactful strategies—like entity structuring, IP separation, and long-term planning—are scalable and beneficial even for businesses with more modest revenues. The key is profitability, consistency, and clean financial records.
Factors for Success
To achieve these outcomes, several key factors are essential:
- Taxpayer Integrity: This may seem obvious, but integrity is critical to long-term success.
- Business Profitability: Profits must be substantial and predictable—tax planning only works if you’re paying taxes.
- Quality of Books and Records: Your internal bookkeeping must be clean and understandable, with both management and outside parties, such as CPAs and the IRS, having confidence in your records.
- Communication: Clear, consistent communication is the foundation of effective tax planning.
Long-Term Tax Planning
A good tax plan is rarely short-term. Typically, it takes 3 to 5 years, or even up to a decade, to develop a solid plan. Quick fixes—such as buying assets to claim depreciation—are often just temporary deferrals that can cause issues as the deferrals expire.
Our Approach to Tax Planning
Our firm has earned a reputation for solid, long-term tax and financial planning. We work with clients across 35 states and 25 foreign countries, staying connected through email, phone, and MS Teams.