Small Business Tax Liability Reduction Strategies

What this video covers

CPAs Orumé Hays and Shaneque Downie present core tax management and liability reduction strategies for small business owners through the New York SBDC. The webinar breaks down cash flow management versus taxable profit, owner compensation across different legal entity types, cash versus accrual accounting methods, and asset depreciation rules. It provides practical rules of thumb on when to elect S-Corp status, how to justify reasonable compensation, and how to utilize retirement contributions and expense elections.

Best for: Small business owners choosing between sole proprietorship, LLC, S-Corp, and C-Corp structures; Business owners planning owner compensation and navigating IRS reasonable salary rules; Businesses deciding between cash-basis and accrual-basis accounting; Not applicable to non-profit founders seeking equity distribution strategies; Not intended as specific individual tax advice without a CPA consultation

Chapters

1. 00:00 Introduction to the Webinar
2. 02:11 Pace SBDC Advisory Services
3. 05:13 Presenter Backgrounds
4. 08:36 Webinar Agenda
5. 09:10 Understanding Cash Flow and Projections
6. 18:41 The Statement of Cash Flows
7. 25:09 Owner Compensation Methods
8. 28:19 Entity Tax Structures and Compensation Rules
9. 40:40 Evaluating Business Entity Selection
10. 45:20 Cash vs. Accrual Accounting
11. 50:24 Asset Depreciation and Expense Elections
12. 53:15 Qualified Business Income (QBI) Deduction
13. 55:06 Worker Classification: Contractor vs. Employee
14. 57:21 Small Business Retirement Plans
15. 1:00:06 Q&A and SBDC Resources

Key points

• 20:25 A business showing positive net income on paper can still experience severe negative operating cash flow due to unpaid accounts receivable.
• 28:44 Sole proprietors and single-member LLC owners cannot pay themselves a W-2 salary and must take owner draws.
• 29:43 S-Corporation shareholder-employees are legally required by the IRS to take a reasonable W-2 salary subject to payroll tax before receiving
• 32:05 C-Corporations pay a flat federal corporate tax rate of 21% and face double taxation when profits are distributed as dividends.
• 35:23 An S-Corporation tax election is generally not recommended until business net profit reaches at least $100,000 due to added compliance and t
• 43:30 Section 1202 Qualified Small Business Stock allows exclusion of capital gains up to $10 million or 10 times the adjusted basis if held for a
• 50:47 The de minimis safe harbor election allows businesses to immediately expense equipment purchases costing $2,500 or less per invoice.
• 52:57 Section 179 permits immediate expensing of up to $1.2 million for eligible equipment, provided the business has positive net income.
• 53:43 The Section 199A QBI deduction enables eligible pass-through business owners to deduct up to 20% of net business income on Form 1040.