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Is Time to Restructure Your Business?

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Is Time to Restructure Your Business?

The Internal Revenue Service (IRS) has finalized regulations to clarify the new law that provides a 20% deduction on pass-through business income. Under the Tax Cuts and Jobs Act passed in December 2017, this law will be in effect for tax years 2018 through 2025.1

The regulations clarify who is eligible for the new 20% deduction and who is not. The following information is provided to help you decide whether it might make sense to restructure your business.

KEY TAKEAWAYS

  • Companies that are established under one organizational form may find it beneficial to restructure as the business evolves over time.
  • Certain types of restructuring can result in more favorable tax treatment for the business and its owners.
  • Recent regulations mean that certain loopholes have been closed, so make sure to understand all the implications and requirements of restructuring before undertaking it.
  • A business must be a pass-through entity to claim the 20% qualified business income (QBI) tax deduction.
  • Phaseouts and caps are imposed on specified service trade or business (SSTB) deductions.

Qualified Businesses

To be eligible to claim a tax deduction for 20% of qualified business income (QBI), your business must be a pass-through entity.1 Pass-through entities are so named because the income of the business “passes through” to the owner. It isn’t taxed at the business level, but instead at the individual level.

Owners of pass-through businesses pay tax on their business income at individual tax rates. Pass-through businesses include sole proprietorships, partnerships, S corporations, trusts, and estates. By contrast, C corporation income is subject to corporate tax rates.23

Qualified Income

The Internal Revenue Service (IRS) defines qualified business income as net business income, not including capital gains and losses, certain dividends, or interest income. The 20% deduction reduces federal and state income taxes but not Social Security or Medicare taxes, which means it also doesn’t reduce self-employment taxes—a term that refers to the employer-plus-employee portions of these taxes that people pay when they run their own businesses.1

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The 20% QBI deduction, also called the Section 199A deduction after the part of the tax code that defines it, is calculated as the lesser of:

  1. 20% of the taxpayer’s qualified business income, plus (if applicable) 20% of qualified real estate investment trust dividends and qualified publicly traded partnership income
  2. 20% of the taxpayer’s taxable income minus net capital gains.1

The calculations are pretty complicated, so in this article, we’re going to keep things simple by not talking about real estate investment trust dividends or qualified publicly traded partnership income.

Section 199A Deduction Phaseout Levels

With a taxable income of $364,200 or less if you’re married filing jointly—and $182,100 or less for any other filing status (adjusted annually for inflation)—you can claim the full 20% deduction.4 However, according to a Tax Foundation report, many pass-through businesses are large companies, and “the majority of pass-through business income is taxed at top individual tax rates.”5

Certain hedge funds, investment firms, manufacturers, and real estate companies, for example, are often structured as pass-through entities. Thus, the limits stand to affect a great many taxpayers.

If you’re one of the taxpayers who own a pass-through business and you have taxable income above these limits, figuring out what deduction, if any, you qualify for under the new tax law is tricky.

Specified Service Trade or Business (SSTB)

The first thing you need to determine is whether you own what the IRS calls a specified service trade or business (SSTB). These are businesses in the fields of “health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading, dealing in certain assets or any trade or business where the principal asset is the reputation or skill of one or more of its employees.”1

The IRS clarifies that the last clause (“…where the principal asset is the reputation or skill…”) is meant to apply to celebrity income, such as a famous chef being paid to allow a cookware line to use their name or a famous television personality getting paid to make an appearance.1

Financial advisors, wealth managers, stockbrokers, accountants, doctors, lawyers, and other businesses in the named fields are considered SSTBs. All others are not. Some of the interesting exceptions include architects, engineers, and insurance agents.

Under the new tax code, it’s generally better not to own an SSTB. Owners of SSTBs are subject to a phaseout and a cap on their deduction, adjusted for inflation each year. The phaseout for 2022 is $340,100 for married taxpayers and $170,050 for all other taxpayers.6 For 2023, the phaseout is $364,200 for married taxpayers and $182,100 for all other taxpayers.4 Within these ranges, the deduction is limited. Above these ranges, there is no deduction.

What happens if you’re the owner of a non-SSTB pass-through entity? Let’s say you’re single and your taxable income is about $207,500. You are allowed to take the deduction if you have qualified business income. However, your QBI deduction may be limited by the amount of W-2 wages your business has paid its employees, and by the unadjusted basis immediately after acquisition (UBIA) of the qualified property your business holds. The deduction is limited to the higher of 50% of total W-2 wages paid or 25% of total wages paid plus 2.5% of the UBIA of all qualified property.7

Changing Your Business Structure

If you think you might pay lower taxes as a non-SSTB pass-through entity, you might be wondering whether you should change your business structure in an attempt to lower your taxes—especially if, say, your high-revenue business both sells insurance and provides financial advice, meaning you have both SSTB and non-SSTB income.

Financial professionals should likely not try to classify themselves as something other than a financial advisor, retirement planner, or actuary to avoid being considered an SSTB. They are specifically excluded from benefiting from this deduction, but the IRS already knows that some businesses might try and skirt the law to get the benefit.

Business Structure Workarounds

Other workarounds that businesses are trying to use will not work in almost all cases as they are already being looked at by the IRS. These workarounds are referred to as “crack and pack,” or splitting up one business into two or more different businesses with the same owner to separate out SSTB income and non-SSTB income and avoid missing out on part or all of the QBI deduction.

The 80/50 rule says that if a ‘non-SSTB’ has 50% or more common ownership with an SSTB, and the “non-SSTB” provides 80% or more of its property or services to the SSTB, the non-SSTB will, by regulation, be treated as part of the SSTB.81

Some businesses may be able to get around the 80/50 rule by reducing the common ownership of the SSTB and non-SSTB businesses below 50%.

C-Corp Conversion

What about changing your pass-through business to a C corporation to take advantage of the 21% flat corporate tax rate, another change that is new under the 2017 Tax Cuts and Jobs Act?9

Converting from a pass-through entity to a C corporation for the lower 21% tax bracket usually is not a good idea due to the double taxation of dividends when taking distributions. A simplified example shows why. If you have a C corporation and have $1 million in C corporation income, you will owe $210,000 at the 21% tax bracket on the corporate tax return, form 1120. Then, when the corporation pays a dividend, you will pay tax again on that distribution on your personal return (form 1040).

Reducing Tax Liability

How then can high-income pass-through business owners best reduce their tax liability under the new rules? There are several steps they can take to reduce taxable income below the phaseout thresholds. These can include:

  1. Implementing larger retirement-plan contributions such as profit sharing or defined-benefit plans.
  2. Lumping charitable contributions through thoughtful use of donor-advised funds.
  3. Being intentional about realized capital gains and losses.
  4. Delaying other sources of income such as pension payments or Social Security.

Business owners who are limited by the 20%-of-taxable-income calculation might wish to increase taxable income through Roth conversions or changing retirement plan deferrals from pre-tax to Roth. Since the qualified business income deduction is limited to the lesser of 20% of QBI or 20% of taxable income, in addition to the asset and wage tests, taxpayers might not have enough taxable income to get the full benefit of the QBI deduction.

Suppose a taxpayer who is married and filing jointly has $100,000 of pass-through income and no other income. That individual would be eligible to deduct 20% of the total, or $20,000. But after taking the standard deduction of $27,700, their taxable income would be $73,000.10 Since 20% of taxable income is $14,600, and that’s lower than 20% of QBI ($20,000), the taxpayer can only deduct $14,600, not $20,000. However, if that person did a Roth IRA conversion of $27,700, taxable income would then be $100,000, and the taxpayer would be able to take the full $20,000 QBI deduction.

The Bottom Line

High-income owners of pass-through entities, especially those classified as SSTBs, should consult with a tax professional to formulate planning strategies that will increase the likelihood of their being able to get the most benefit from the qualified business income deduction.

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FINANCE

The Benefits of Working With an Experienced Engineering Firm

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The Benefits of Working With an Experienced Engineering Firm

The engineering services market share increased 8.1% per year from $991.38 billion in 2021 to $1071.59 billion in 2022.

Everyone who designs a building or machine hopes it’ll run smoothly and last for years. It requires a lot of expertise and talent, and an engineering firm can help you achieve those better. However, not everyone can deliver the same results. 

In creating any structure or equipment, you don’t want to lose your investment because of mistakes in the design process. The more skilled and knowledgeable the firm, the wiser it can be to advise you.

If you have questions about the planning or execution of a project, an engineering firm with expertise can be a great asset to you and your business. Please keep reading to learn how it can benefit you.

Gain Insights from Expert Engineers

It can help business owners and decision-makers understand which engineering tactics are reliable and effective. Expert engineers can provide a detailed analysis based on years of working in the field and highlight potential dangers and hazards before they occur. Furthermore, they can also point management and workers toward best practices.

You can bring a wealth of insight on the most current technical information to the table due to their years of experience. It’s an invaluable source of wisdom and guidance for businesses.

Cost Savings from a Proven Process

Working with an experienced engineering firm can have lots of cost savings. It is because they have a thorough knowledge of the resources and techniques they need to complete any project. They can also provide less costly alternatives for resources and materials.

Their expertise also ensures that projects are designed to the highest standards. It reduces the need for costly delays due to unforeseen problems. 

Consider a value-added distributor engineering firm if you are looking for a quality and cost-saving project.

Positive Long-Term Results and Relationships

As a result of the firm’s successful relationships, there is a possibility of getting discounted rates and favorable terms. The firm can even provide engineering solutions when managing legal issues.

An experienced engineering firm also means long-term relationships have an opportunity to develop. It allows both parties to have a better understanding of each other and the ability to build trust. It will also smooth out issues in the future.

Reduced Risks

An experienced engineering firm will be able to foresee issues that may come. On top of that, they can work with the latest technology and tools to make a project run smoother. Having the right resources can help the project reach completion faster and with fewer issues.

Partner with an Experienced Engineering Firm

In conclusion, working with an experienced engineering firm can benefit a project. They possess the technical expertise, advanced technology, and industry knowledge necessary for the project’s success. Consider partnering with a reliable one and unlock the potential of the project.

If you find this helpful in starting your dream project, continue browsing our site for more.

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Can the Characteristics of Candy Boxes be Used for Packaging Purposes?

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Can the Characteristics of Candy Boxes be Used for Packaging Purposes?

Sweets and candy can be packaged in novel ways with the help of packaging for sweets. Because of its durability, it’s great for storing expensive and valuable candy. A wide range of sizes, shapes, & forms is available. Flexible and moldable, it is ideal for manufacturing materials like corrugated cardboard and even Kraft paper. Due to its natural state, it’s cheap and easy to get your hands on. Brands can have it printed in a variety of colors, themes, and unique designs. It is beneficial to the environment because it is recyclable and made from organic materials.

There are currently a large number of stores that sell candy and other sweets. In the last few years, the candy industry has experienced significant growth. In order to better organize and present their products, many manufacturers turn to Custom candy boxes. Incorporating this tool into your marketing strategy can significantly boost the bottom line of any company that decides to implement it. Because of the numerous customization options, it can effectively reach a wide range of potential customers and introduce the brand and product to a variety of niches. This item’s advantages and features are the primary reasons for its reputation as a high-quality packaging solution.

OUTSTANDING STRENGTH AND POWER

Yes, I’m looking for a variety of shapes and sizes of sweets. It is clear that no one will enjoy eating these kinds of sweets. To ensure the product’s appearance and quality and its quality and taste, it is essential to select the appropriate packaging method. As a result, candy packaging is becoming a more valuable commodity in the packaging industry. Kraft and box boards are used to make them strong and durable. Your company’s image can be improved by offering your sweets in the most appealing designs to entice new customers. Additionally, it shields your product from moisture, bacteria that thrive in humid environments, and other potentially harmful elements. To ensure the safety of all of your possessions, you should stock up on this powerful product.

THE DESIGN AND SHAPE CHANGES

Candy should be presented in an interesting and creative way. Containers for the candy should be distinctive and one-of-a-kind. Candy packaging can be easily and quickly customized to meet a variety of needs. For example, you can easily mould the boxes’ surfaces to create new and interesting designs. Cut out windows in these boxes to showcase your confections, for example. Handles and paper layers on top of the boxes can be used to make them more user-accessible. It’s also possible to customize additional options, such as custom-designed inserts or add-ons. They are in a variety of shapes & sizes, including the display Gable Flip Top and the tuck ends round circular.

STUNNING PRINT SURFACE TYPE

Printing isn’t just a choice for supplying your boxes with client-requested data. Packaging that is visually appealing, educational, and fun can also be created with this material. It makes no difference in the cutting-edge printing techniques you use to package your products. You won’t get high-quality prints if you use a container that doesn’t have solid printing surfaces. Packaging like chocolate boxes has excellent printing surfaces. Large printing areas are possible because of the use of Kraft material in these boxes. Offset, digital, and screen printing are all methods they employ.

POSSIBLE WAYS TO PRESENT

Your product’s packaging isn’t enough to persuade customers to buy it. Instead, your items should be displayed in a visually appealing manner. Boxes of candy are a great option in this situation. There is a number of ways to improve the aesthetics of the boxes so that they appeal to your target audience. You could, for example, use eye-catching color combinations and individual colors to enhance their exteriors. They can be styled in a contemporary manner. They can also be printed with designs that correspond to the candy’s flavor and appearance. Theme Options for your boxes are plentiful in this regard, with a wide range of options to choose from.

SUSTAINABILITY TECHNOLOGIES

Plastics used in packaging goods have direct consequences on our environment right now. Non-recyclable materials and chemical solutions make up the product. Due to the difficulty of removing it from the environment, it may be harmful to the environment as a result of environmental harm and environmental damage. Therefore, companies should consider packaging options that are recyclable, reusable and made with organic and sustainable materials. Examples of these environmentally-friendly alternatives can be found in candy boxes. Cardboard, Kraft, or boxboard are common materials used in their construction. They’re safe for the environment, and they’ll help you build a positive reputation for your company in the marketplace.

Marketing For the Brand

The role of marketing in a company’s quest for long-term growth and success has grown significantly. There are many ways to promote your company’s image and use tools to benefit from marketing. Therefore, you should consider purchasing wholesale confectionery boxes and printing them with your company’s logo. Your logo, personal information, slogan, advertising information, and more can all be included in the packaging, which can be customized to your specifications. The text on the outside of these boxes can also be embossed to make them more appealing and effective marketing tools. In comparison to other promotional tools, these boxes are inexpensive and do not have any restrictions. In addition, they could provide long-term marketing benefits for your company with no additional expenditures required.

Rigid boxes and candy packaging have all of the qualities and features listed above, making them ideal packaging solutions. Businesses benefit from its advantages as a result of this. For businesses, it’s a way to reach the target audience they want to reach. Businesses benefit from spectacular product presentations and stand out in any market with this ground-breaking strategy. To get the most out of it, it’s best to buy it in bulk and then customize it to your product’s specifications.

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Realtor Definition

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Realtor Definition

What Is a Realtor?

A realtor is a real estate professional who is a member of the National Association of Realtors (NAR), a professional association. The NAR defines the term realtor as a federally registered collective membership mark that identifies a real estate professional who is a member of the association and subscribes to its code of ethics.1

KEY TAKEAWAYS

  • A realtor is a real estate professional who is a member of the National Association of Realtors (NAR), a professional association.
  • Professionals who may hold the title of realtor include agents who work as residential and commercial real estate brokers, salespeople, and property managers.
  • Realtors are expected to be experts in their field.
  • They must follow the NAR’s code of ethics, which requires agents to uphold a certain standard of duty when working with clients.
  • Compliance with the code of ethics became a requisite for membership in 1924.2

Understanding Realtors

Professionals who hold the title of realtor include agents who work as residential and commercial real estate brokers, salespeople, property managers, appraisers, counselors, and other real estate professionals.

The term realtor is a registered trademark.1 As of October 2021, there were 1,564,547 realtors. That broke down as 68% real estate agents, 20% real estate brokers, and 13% associate brokers.3 Realtors must belong to both a local association or board and a state association.4

Realtors are expected to be experts in their field and must follow the NAR’s code of ethics, which requires agents to uphold a specific standard of duty to clients and customers, the public, and other realtors.

Among its many requirements, the code of ethics says that realtors “shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.”

The code also states that realtors “shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations.”

Furthermore, realtors must “pledge themselves to protect and promote the interests of their client” while treating all parties to the transaction honestly.5

1,564,547

The number of realtors as of October 2021.3

Guidelines for Using the Realtor Trademark

The NAR maintains stringent rules on the use of the realtor trademark. Professionals who hold membership as a realtor or realtor-associate on a member board are licensed to use realtor trademarks in connection with their name and the name of their real estate business.

The realtor trademark is prohibited from being used as part of the legal corporate name of members of the association.6 According to the NAR, this is done to avoid the legal issues involved with a corporate name change if a member were suspended or expelled from the association and lost the right to use the trademark.7

Furthermore, the NAR’s guidelines state that if a qualified member uses the realtor trademark as part of their name, it must appear in all capital letters and be set off from the member’s name by punctuation.

The NAR does not use the realtor trademark with descriptive terms or as a description of the vocation the way terms such as real estate broker, agent, and licensee are used. The association also says that realtor trademarks are not to be used as a designation of the licensed status of a professional.86

When Was the National Association of Realtors Started?

The NAR was founded as the National Association of Real Estate Exchanges in 1908. At the time, it had 120 members, 19 boards and a single state association.

What Is the Realtor Code of Ethics?

The Code of Ethics & Professional Standards is a set of rules focused on fair and honest behavior that members pledge to abide by. They concern the manner in which clients must be treated and conflicts should be handled. The Code of Ethics holds members to a high moral standard.

How Are Real Estate Agents Different From Realtors?

Real estate agents are individuals who are licensed by their state to help people buy and sell real estate. Realtors are real estate agents who have opted to become members of the National Association of Realtors. NAR members have access to a wealth of training, tools, and data to help them provide their clients with a completely professional experience.

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