Tax Planning & Strategy

Here we are covering all that you need to know from a tax planning perspective if you own (or want to own) an IT consulting company.

IT Consulting involves providing expert advice and services related to information technology, assisting organizations in overcoming technology-related challenges, enhancing processes, and achieving business objectives.

Unique Attributes and Tax Planning

Low Starting Capital: Starting the business typically requires minimal capital though its sustainability relies on Loans and the Line of Credit. The key to unlocking this financial support is showing the lender that you are making “Profits” to pay off the loan.

High Payroll Cost & Multi-State Operations:  Hiring consultants from various states requires a careful approach to ensure compliance with each state’s regulations, a task that can be challenging without proper planning.

Business Growth: Businesses are typically valued based on the number of employees as well as the revenue. The business typically needs large working capital for sustainable growth.

Employee Types: Employs both 1099 contractors and W-2 employees, so must maintain proper bookkeeping and compliance for the better representation of the financials.

Optimal Structure: A S-Corp or C-Corp structure is ideal depending on the type of ownership, it is domestic or foreign. S-Corp cannot have foreign owners or more than 100 shareholders.

Maximizing Savings: Tax planning helps in maximizing after-tax income by considering different pretax options available like 401K, SEP, and DB plans which helps achieve the strategic financial goal.

Risk Mitigation: Must have E&O and general liability insurance. Some clients may require having the bond as well. The business insurance cost including “Key man” insurance cost is a deductible business expense.

Cost Efficiency: Payroll is typically the major cost for this type of business. Through proper planning & cost segregation by client or department, businesses can optimize their Profit and Loss and drive the business in the right direction.