| RANDOM
DRUG TESTING FOR OFF-DUTY DRIVERS, Q:
Can a motor carrier require a driver to submit to a random drug test
while he/she is off-duty (like sick or on vacation)? SUCCESSION PLANNING Out of necessity, every business owner must prepare for the day he or she leaves the business, whether it be due to retirement, disability or death. Family succession planning involves more than just selecting someone to step into the shoes of leadership; it also means preparing to pass down ownership of the business they personally founded and nourished through years of hard work. Some members of the family may wish to work in the family business, and others may not have the same desire. Yet the children are the heirs of the founders and the division of shares among them needs to be fair. Family succession planning is best accomplished when planned ahead of time so business owners can identify their goals and establish a plan that makes sense in light of the family’s circumstances, the founder’s wishes, the value of the business and the time frames in which the founder believes he or she will retire and pass on the control (and eventually ownership) to the person identified as his or her successor. Planning in this fashion is not as difficult as it might first seem. Once started, many founders of family businesses find the going much easier than anticipated, and the process based as much on common sense as it is on good tax and estate planning. Let’s face it, you can either leave your business to your children and grandchildren under a well thought out plan that accomplishes what you want, or you can leave what’s left of it to them after Uncle Sam and the creditors get through with it. The choice is yours. The bottom line is this: after working so hard all these years to build your business, there’s never a “convenient” time, in terms of what’s going on with your business, in which to suddenly be disabled or to die. And on reflection, retiring never seems to be exactly convenient either. So every family-owned business must plan today as if tomorrow is the surprise appointment you didn’t know you had with the next life - the day you didn’t show up for work, the day in which the plan worked or didn’t (because there wasn’t one). The choice for planning ahead is yours. As my father used to say, “The difference between a hero and a fool is timing.” Do this for yourself as much as for your family. Don’t let time run out on you by surprise. Call the NTA today at 1-800-805-0040 and ask for a consultant. HOW TO PAY YOURSELF Small business owners can compensate themselves in several ways. Many depend on how the business is structured, but each withdrawal must be weighed against the impact on the business and taxes. Before you decide how many hours and what type of benefits, if any, you can afford to give an employee or driver, you first need a solid compensation structure for yourself. You’ve put endless amounts of time, tears and cash into your business, so how do you start pulling something back out? Here are a few ways to reward yourself: Bonuses. This is an easy way for owners of sole proprietorships, partnerships or limited liability companies to pay themselves at year’s end once profits have been totaled. They can also be coupled with small “draws” taken throughout the entire year. Dividends. Profit distributions (dividends) are exempt from self-employment tax, which is a big plus for S-corporations, which distribute money through wages and profits. Draw. Unlike corporations, entities such as partnerships, LLC's and S-corporations are taxed only once. All profits go to the owners, so you take wages, or a “draw”, and report it on your personal return. Fringe benefits. These extras can add up. Many of them are business deductions and can include: a company car, paid vacations, holidays, and sick days, life insurance (split plans can benefit owners and employees), reimbursement accounts such as medical and dependent care, retirement plans (a tax exempt method to build up personal wealth) and more. Income shifting can be another fringe benefit. Certain small business owners can shift income to a lower tax bracket and avoid some payroll taxes by employing family members. Income to children under age 18 is not subject to Social Security withholding (FICA). Wages to those younger than 21 are not subject to unemployment insurance (FUTA). Income to children remained tax free up to $4,250 in 2003. Wages paid to a spouse are subject to FICA, but not FUTA. Paying yourself a straight salary is only important in the double-taxation situation of the corporation whereby corporate tax rates are imposed on profits minus expenses, including salaries. Any profits that remain are distributed as dividends. You determine the size of the salary you take after weighing who gets the greater tax benefit of the salary deduction - you or the corporation. For comments or questions, call
me at (562) 279-0557 or (800) 805-0040. Until next month, “Drive Safe
- Drive Smart!” |