Management companies can deliver tax and non-tax benefits to improve your company’s long-term financial health.
If you own more than one restaurant, you may be able to reap substantial tax and non-tax benefits by structuring a management corporation that provides services to the restaurants you own. If you haven’t explored this strategy, you may be missing out on significant financial opportunities.
Multi-unit owner/operators can often better manage their business and gain tax benefits by setting up a separate corporation for their management company. We have worked with many of our clients to set up a regular “C” Corporation, and they were able to reduce their tax rate to 15% on the first $50,000 of income, rather than paying the top individual rate of 39.6%. This strategy can be implemented annually until $250,000 worth of profits have been accumulated in the management company.
Increase Equipment Expensing Limit
Another benefit of a management corporation is that it is a separate entity, and it can acquire computers, office furniture, equipment, and even certain vehicles, and elect to expense up to $25,000 on the 2014 return. This is in addition to any amounts expensed under section 179 on the operating entities. Structures of this nature can also help minimize FICA (Social Security and Medicare) taxes.
Limit Legal Liability
The non-tax benefits to this business structure could include helping to limit legal liability. The management corporation can serve as a general partner of a limited partnership (LP) or the managing member of a limited liability company (LLC), with as little as 1% ownership interest.
As you know, tax laws change frequently and every business has unique aspects that influence their structure. Before implementing a strategy as outlined above, it is important to discuss it with your tax advisor to ensure that it is the right strategy to meet your specific business goals.
If you aren’t certain that your financial performance is all that it could be, request a no-cost Diagnostic Review of your business.
