top of page

Frequently Asked Questions

1) LLC vs S-Corp: When should I elect S-Corp status to lower self-employment taxes?

​

If your business nets over $80,000–$100,000 in profit and you actively work in it, you’re probably paying too much in self-employment tax as a plain LLC.

By electing S-Corporation status, you can split income between a reasonable salary (subject to payroll tax) and owner distributions (not). Most owners save $6,000 – $15,000 per year once payroll and compliance are set up properly.
 

2) How do I set “reasonable compensation” for S-Corp owners without triggering IRS issues?
 

The IRS expects S-Corp owners to pay themselves a reasonable wage for the work they perform.

We benchmark that using industry pay data, your role, and profit level. For example, if your home-services business nets $200K, and you’d pay a manager $80K to replace you, that’s your baseline.

Under-paying yourself raises audit risk; over-paying cancels the tax benefit. We help owners document how they arrived at the number and keep W-2s, minutes, and comparisons on file.

3) Section 179 vs Bonus Depreciation — which saves more on vehicles and equipment this year?
 

Both let you deduct the cost of big purchases upfront, but the rules differ:

  • Section 179 lets you choose which assets to expense, up to the annual limit (~$1.22 million for 2025).
     

Bonus Depreciation automatically writes off a percentage of qualified assets (60% in 2025, phasing down).
Use 179 when you want to target specific purchases; use bonus when you want full write-off power.
For trucks, vans, and heavy SUVs used >50% for business, we often combine both for maximum write-off—just keep mileage logs and proof of business use.

4) Can I use the Augusta Rule and an Accountable Plan to reimburse myself tax-free? How does it work?
 

Yes — this is one of the cleanest “hidden-in-plain-sight” owner strategies.
The Augusta Rule (IRS §280A) allows you to rent your personal home to your business for up to 14 days per year tax-free. The business deducts it; you don’t report the income.

Pair it with an Accountable Plan, which reimburses you for home-office, phone, vehicle, and other business expenses tax-free.
We draft written policies, minutes, and market-rate documentation so the deductions are airtight and audit-proof.

5) Home office and vehicle deductions — mileage vs actuals — what’s best for a service business?
 

The mileage method is simple and works great if you drive a lot but don’t have huge vehicle expenses. The actual-expense method (fuel, insurance, maintenance, depreciation) usually wins once your vehicle is newer, financed, or used almost entirely for work.

For home offices, the key is exclusivity—dedicated space used regularly for business.
Combine these with photos, mileage logs, and receipts and they become some of the highest-ROI deductions in the code.

6) QBI (Section 199A): How do I qualify and optimize the 20% pass-through deduction?
 

The Qualified Business Income (QBI) deduction lets many business owners deduct up to 20% of their profit—but it’s not automatic.
It phases out once income exceeds certain thresholds (around $383K married / $191K single for 2025), and some service industries face limits.
You can optimize by:

  • Structuring as an S-Corp with wages that support QBI
     

  • Maximizing retirement and HSA contributions to lower taxable income
     

Avoiding “specified service” status when possible
The key is proactive planning before year-end. We model QBI eligibility alongside your payroll and retirement plans so the deduction sticks.

7) Solo 401(k) vs SEP vs Cash-Balance: What’s the right retirement plan for owners earning $200K+?
 

If your business profits have outgrown your IRA, it’s time for a strategy built for entrepreneurs:

  • Solo 401(k): Up to ~$69,000 (2025) in annual contributions, plus Roth and loan options—ideal for solo owners or married couples working together.
     

  • SEP IRA: Easier setup, great for variable income, but must contribute the same % for all employees.
     

Cash-Balance Plan: A hybrid pension for high earners ($200K–$500K+) that can shelter six figures per year.
We often stack these—Solo 401(k) for flexibility, Cash-Balance for tax deferral—to turn excess profit into a retirement engine.

8) Backdoor Roth and Mega Backdoor strategies: Can business owners still use them—and when do they make sense?
 

Yes, and they’re powerful—especially for high earners who phase out of regular Roth eligibility.
A Backdoor Roth converts nondeductible IRA contributions into Roth funds tax-free (if done cleanly).
The Mega Backdoor Roth happens inside a 401(k) plan that allows after-tax contributions and in-plan conversions—often adding $20K–$40K per year of Roth savings on top of standard limits.
We design plans to make these legal, compliant, and automated—because the tax-free compounding is unmatched.

9) HSAs, 529s, and insurance planning: How do these fit into a tax-efficient wealth plan for entrepreneurs?
 

Think of these as micro tax shelters inside your bigger strategy:

  • HSA: Triple tax benefit—deductible going in, grows tax-free, and comes out tax-free for medical.
     

  • 529 Plan: Tax-free growth for education; also a smart legacy tool when funded early.
     

Life Insurance (permanent policies): Properly structured, can add tax-free retirement income and business continuity protection.
We integrate these into your personal plan, aligning cash flow, coverage, and long-term wealth building.

10) What records do I need (policies, logs, minutes) to defend aggressive but legal tax strategies?
 

Documentation turns “gray-area” tax moves into defensible deductions.
At minimum, every owner should keep:

  • Corporate minutes showing decisions (elections, accountable plans, Augusta Rule use)
     

  • Expense logs and receipts for vehicles, travel, and meals
     

  • Reimbursement policies and signed accountable plan memos
     

Entity documents (EIN, S-Corp election, operating agreement)
If it’s in writing and consistent, the IRS usually moves on. We set up your digital binder so you’re always audit-ready without the clutter.

11) Quarterly estimated taxes and safe harbors: How do I avoid penalties while keeping cash flow healthy?
 

The IRS expects business owners to pay as they go. Missed estimates trigger penalties—usually 3–6% per quarter.
You can avoid them by meeting a “safe harbor”:

  • Pay 100% of last year’s tax (110% if income >$150K), or
     

Pay 90% of what you owe this year.
We design payment systems that protect cash flow—often setting aside 25–30% of profit each month in a “tax account.”
With clean books and quarterly check-ins, you stay penalty-free and sleep better knowing taxes are already handled.

12) Contractor (1099) vs Employee (W-2): How do I classify workers correctly and protect my deductions?
 

The IRS uses a “control test”—who decides how the work gets done.
If you dictate hours, tools, or methods, they’re likely an employee. Misclassify and you risk back taxes and penalties.
For true contractors:

  • Always use written agreements and W-9s
     

  • Verify business status (LLC or EIN preferred)
     

Pay via check or 1099-NEC, not payroll
We build hiring checklists and SOPs that keep your team compliant and your deductions safe.

13) Multi-state nexus & apportionment: What if I sell or service across state lines (logistics/trucking included)?
 

“Nexus” means your business has a taxable presence in another state—through employees, vehicles, warehouses, or significant sales.
Each state defines it differently. For trucking and logistics, where loads originate or terminate often triggers reporting.
The right fix is apportionment—splitting revenue and expenses fairly among states using approved formulas.
We track activity, register where needed, and prevent double taxation so you stay compliant while expanding your reach.

14) R&D and energy credits: Can service businesses qualify—and what documentation is required?
 

Yes—R&D isn’t just for tech. If you design new systems, improve processes, or build proprietary methods, you may qualify.
That includes construction innovation, software for dispatching or estimating, and workflow automation.
Energy credits now extend to HVAC upgrades, EV fleets, and renewable installs.
To claim them, you’ll need contemporaneous proof: project notes, time logs, receipts, and contracts.
We coordinate with specialty credit teams to capture every eligible dollar.

15) Cost segregation: When does it make sense for owner-occupied or investment real estate?
 

A cost segregation study accelerates depreciation by identifying components—plumbing, fixtures, electrical—that qualify for 5-, 7-, or 15-year write-offs.
For owner-occupied buildings, this can produce tens of thousands in front-loaded deductions, boosting cash flow.
It’s most valuable when:

  • Property cost >$500K
     

  • You expect steady profits for the next few years
     

You want to reinvest or reduce tax on active income
We connect clients with engineers who handle the analysis and produce an IRS-defensible report.

16) How do I scale my business without burning out?
 

Burnout happens when you scale hustle instead of systems.
The cure is structure:

  • Define roles (delegate repeatable work, protect high-value time)
     

  • Create a meeting rhythm (weekly metrics, monthly strategy)
     

Document processes so growth doesn’t depend on you remembering everything
We build these frameworks using elements from EOS, Scaling Up, and 4DX—adapted for owner-operators in service, trucking, and logistics.
You’ll grow capacity without losing your mind.

17) Pricing and cash flow: value-based vs hourly — what boosts margin and reduces feast-or-famine cycles?
 

Hourly pricing traps you in a time-for-money loop.
Value-based pricing ties fees to results—faster delivery, guaranteed uptime, clean installs, etc.—so profits rise with performance, not hours.
We help owners:

  • Analyze client ROI to set premium tiers
     

  • Build recurring or retainer packages
     

Track gross margin by service line
The shift stabilizes cash flow and makes scaling predictable instead of reactive.

18) What KPIs should I track weekly to grow profit in a home-services or logistics company?
 

Focus on what drives cash, not vanity metrics.
Our go-to list:

  • Revenue per job / load
     

  • Gross margin %
     

  • Labor utilization
     

  • Lead-to-close rate
     

Average days to collect
A simple dashboard showing these five numbers each week gives you control.
We install that dashboard and coach your team to read it—so every decision ties back to profit and time.

19) What bookkeeping tech stack and monthly close checklist works best for $200K–$2M+ businesses?
 

Simplicity wins. We recommend:

  • QuickBooks Online or Xero for accounting
     

  • Gusto for payroll
     

  • Dext / Hubdoc for receipts
     

Google Drive / Dropbox for document storage
Monthly close checklist: reconcile bank + credit cards, review P&L vs prior month, categorize owner draws, and update KPI sheet.
A 30-minute ritual that keeps you tax-ready and lender-ready year-round.

20) Owner pay, payroll, and distributions: how do I structure compensation for taxes, lending, and personal wealth?
 

Owner pay has three layers:

  1. Salary — your W-2 from the S-Corp (reasonable comp)
     

  2. Distributions — profit withdrawals, usually quarterly
     

Reimbursements — tax-free under an Accountable Plan
We balance these so taxes stay low, cash flow stays smooth, and you qualify for financing or mortgages.
The goal: consistent income, minimal tax drag, and documented proof that your business funds your lifestyle safely.

bottom of page