There are a number of business incentives out there that companies don't know about and provisions that, unless you are looking specifically for them, may be overlooked. Jim Sacher, CPA in 60 minutes, identifies 12 great, and likely not-often-heard ideas that will help you save money, reduce taxes, and possibly unlock opportunities for new business growth.

1. 12 Great Ideas in 60 Minutes
James Sacher, CPA
October 30, 2014

2. • Twelve solutions looking for a
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problem
• Huge increase in tax rates make
these worth some thought
• Won’t work for everybody
• Some may be old some, some
forgotten, some obscure,
some new
• If anything strikes a chord – call
us
GREAT IDEAS

3. FOR CHILDREN
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#1: IRA
• What to look for:
 Closely held business operating profitably
 Family members of working age
 Some disposable income
• The opportunity:
 Put the kids to work
 Pay them a reasonable wage
 Contribute their earnings to an IRA

4. FOR CHILDREN
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#1: IRA
• The benefit:
 Tax free income to the kids
(because of the IRA contribution
deduction and/or tax rates)
 The miracle of compounding
‒ 8 years of $2,000 contributions from
age 14 to 21, at 3%, grows to
$65,296 by age 65
 Bonus: use a Roth IRA; miss the
tax deduction, but completely tax
free at age 65

5. #2: PREPAID EXPENSING
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• What to look for:
 Accrual basis business
 That is profitable
 Prepaid expenses on the Balance Sheet
• The opportunity:
 Treat prepaid expenses on the cash basis
• The benefit:
 One time deduction on all of the prepaid expenses on the
Balance Sheet
 No permission for change of accounting method required

6. #3: COST SEGREGATION
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• What to look for:
 Real estate acquired within the last several years
 Tax paying entity
 Cost over $750,000
• The opportunity:
 Reclassify property depreciated over 39 years into shorter lives
(5, 7, or 15)
• The benefit:
 Faster tax depreciation, larger tax deductions
 Missed depreciation from prior years can be caught up all at once
(big deduction)

7. #4: MINIMIZING SE TAX
FOR LLC MEMBERS
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• What to look for:
 LLCs that are operating profitably
 Have owners that are active in the business
• The opportunity:
 Create a second class of ownership units (B units) with no voting
rights
 Issue at least 20% of the ownership to non-active third parties
(spouse / family members)
• The benefit:
 B units do not attract the self-employment tax
 Savings 2.9% - 3.8% of trade or business income

8. #5: LTC INSURANCE
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• What to look for:
 Business owners that have
available cash flow
 Business owners that want to
compensate key management
• The opportunity:
 Create a long-term care plan for
key executives
 Could supplant their existing out
of pocket costs

9. #5: LTC INSURANCE
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• The benefit:
 Provide long term care insurance at no tax cost to select
employees
 Tax deductible to the corporation
 Benefits are tax free to the insured
 Can be discriminatory
 Includes spouse and family members
 Portable
 Discounted pricing
 Could even be a trade for salary
 No brainer

10. CHARGE DISC
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#6: INTEREST
• What to look for:
 Profitable operating businesses selling into foreign countries
 Where most of the production costs are in the US
• The opportunity:
 Create an Interest Charge (IC) Domestic International Sales
Corporation (DISC) to act as the “selling agent” for the operating
business

11. CHARGE DISC
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#6: INTEREST
• The benefit:
 Sales commissions paid to the IC DISC are tax deductible to the
operating business
 The IC DISC is tax free: dividends paid to shareholders taxed at
20%
 Can be accumulated for estate planning
 Can shift income to lower bracket tax payers
 “The bucket of money in the parking lot”

12. #7: R&M CAPITALIZATION
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POLICY
• What to look for:
 Fixed asset purchases
 Profitable company
 Audited financial statements
• The opportunity:
 Adopt formal fixed asset capitalization policy
 Expense all purchases under $5,000
• The benefit:
 Immediate tax deduction for capital assets
 Reduced record keeping

13. #8: INVESTOHIO
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• What to look for:
 Purchases of fixed assets
 Hiring of employees
 Expansion of business
• The opportunity:
 The State of Ohio InvestOhio Program
 Limited time only!

14. #8: INVESTOHIO
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• The benefit:
 Ohio income tax credit equal to 10% of equity contributed to
business
 Available in five years
 Found money – the state will subsidize 10% of your cost

15. - 15 -
• What to look for:
 Company sponsored retirement plans
 Business owner as trustee
 Risk averse
• The opportunity:
 Hire a section 3(38) advisor
• The benefit:
 Transfer investment risk to a third
party
 Clean up ERISA risks
 Better management of retirement
assets
#9: ERISA REVIEW

16. INSURANCE COMPANY
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#10: CAPTIVE
• What to look for:
 Profitable business that wants to better manage its insurance
costs or has difficulty obtaining cost effective coverage
 Annual insurance premiums of about $1MM
• The opportunity:
 Create a private insurance company to provide first layer of
coverage for business risks
 Insure otherwise problem risks
 Better control risk management

17. INSURANCE COMPANY
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#10: CAPTIVE
• The benefit:
 Better control of insurance costs since the operating business
takes the first layer of risk
 Can find coverage for hard to insure risks
 Create a tax deduction for the operating business without
creating taxable income for the insurance company
 Perhaps convert ordinary income into capital gain
 Build a war chest for future claims

18. - 18 -
#11: ESOP
• What to look for:
 Profitable business
 Older owners interested in
taking risk off the table
 Not quite ready to sell to a
third party
• The opportunity:
 Create an Employee Stock
Ownership Program to buy the
company

19. - 19 -
• The benefit:
#11: ESOP
 Owner sells the business for fair market value
 Bank financing for the buy out
 No immediate gain to the owner
 Steady, regular cash stream to the owner
 Increased cash flow for the business
 Owner stays in some level of control

20. #12: SECTION 199
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DEDUCTION
• What to look for:
 Profitable business
 Engaged in manufacturing
 Qualified Production Activity Income less than Taxable Income
• The opportunity:
 Increase the Domestic Production Activity Deduction
 For all open years
• The benefit:
 Tax savings from increased deductions
 Can apply to construction companies and software developers

21. BONUS #13: CASH BALANCE
RETIREMENT PLAN
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• What to look for:
 Profitable business
 Disposable cash flow
 Small or younger work force or workforce with generous current
retirement plan
 Owners older and active in the business

22. BONUS #13: CASH BALANCE
RETIREMENT PLAN
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• The opportunity:
 Create a tax favored retirement plan that
behaves like a 401(k) plan with defined
benefit plan limits
 Large contributions on behalf of older
owners
• The benefit:
 Large tax deductions for money going to
owners
 Creditor protection
 Some flexibility

23. • Lots of ideas in a short time
• Many technical requirements
• Do it right; no shortcuts
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SUMMARY

24. IT SEEMED LIKE A GOOD
IDEA AT THE TIME
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Don’t be like this guy…

25. If you have any questions, or need additional
information, please contact:
Jim Sacher, CPA
Partner
(440) 449-6800
jsacher@skodaminotti.com
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QUESTIONS?