Issue link: https://www.massageandbodyworkdigital.com/i/68173
BUSINESS SIDE any income taxes owed as a result of profits earned—just like other self- employed people. In the event the business is not profitable, the partners each have a share in the losses incurred. A partnership is often referred to as a "pass-through," because the profit or loss is not the responsibility of the company itself, but of the partners who own the company. There are several different types of corporations and different taxation rules may apply according to which one you choose. The main benefit to incorporating a business is that it offers a certain amount of protection for personal assets should your company become insolvent; should the corporation go bankrupt, a shareholder can only be held liable for the amount of money that was personally invested. All business expenses are tax-deductible. The owners of a corporation are referred to as "shareholders." You don't have to have a big company to incorporate; a "close corporation" is a company that usually has 1–30 shareholders, while a "general corporation," also referred to as a "C corporation," may have an unlimited number. Unless you're planning to open a major spa or be the next Massage Envy, these structures would probably not apply to you. These types of business structures are subject to double taxation; the corporation itself pays taxes, and the shareholders are liable for taxes on the dividends they have earned from the corporation's activities. Many small business owners choose to register as a subchapter S corporation. The primary distinction of an S corporation is that the owner(s) elect to be treated as a sole proprietorship or partnership for income tax purposes, thus avoiding the double taxation of the other structures. An LLC, or limited liability company, blends the characteristics of a corporation and a partnership, with income passing through to the owner(s) for tax purposes. It is often incorrectly referred to as a limited Plan Ahead Whether you are an independent contractor, sole proprietor, or otherwise self-employed, it is vitally important for you to keep up with the amount of money you're taking in and to pay your quarterly estimated tax. Letting that go all year and thinking you'll just pay it all in April is a bad idea for several reasons, not the least of which is the heart attack you might have when your accountant tells you on April 14 that you owe thousands of dollars. liability corporation. An LLC does not quite provide the same protection of personal assets that a corporation does, particularly if the IRS rules there has been any impropriety in bookkeeping, and is not recognized in all states. DON'T BE AFRAID OF THE IRS Contrary to popular belief, the Internal Revenue Service is not the big bad wolf. In fact, the best place to find clear, detailed, and accurate information on taxes—including the many legal deductions you can use to avoid paying them—is on the IRS website (www.irs.gov). The worst thing you can do, if you Don't let that happen to you. Ask your tax professional what tax bracket you fall in, if you don't know, and make it a point to put aside that money on a weekly or monthly basis. By putting it in a savings account where it will earn interest, you'll make a little bit of money during those periods of time when you're saving it for the tax man. don't have the money on hand to pay your taxes, is to fail to file your tax return. The IRS will automatically approve a payment plan for you in order to help you become tax-compliant, as long as you owe them less than $100,000; they'll charge you interest on the money you owe until your taxes are paid in full. However, fail to file your return, and the IRS will also slap on a big fat penalty; if you let it go long enough, you can be charged with tax evasion, risk having a lien attached to your assets, or have your wages garnished. File your return on time, even if you can't pay what you owe, and submit a request for a payment plan. If you follow the rules, you won't get into trouble. Simple Guide to Therapeutic Massage and Bodywork Examinations (Lippincott Williams & Wilkins, 2009) and One Year to a Successful Massage Therapy Practice (Lippincott Williams & Wilkins, 2008). A third book, A Massage Therapist's Guide to Business, will be published by Lippincott Williams & Wilkins. She is the owner of THERA-SSAGE, an alternative wellness clinic of more than a dozen practitioners of different disciplines, and continuing education facility, in Rutherfordton, North Carolina. Visit her website at www.thera-ssage.com. Laura Allen is the author of Plain & connect with your colleagues on massageprofessionals.com 25