Business CPA

Maximizing Tax Savings with LLC Restructuring: A Guide for Business Owners

Choosing the right structure for your LLC can significantly impact your taxes, liabilities, and overall financial efficiency. For growing businesses, restructuring can be the key to unlocking tax savings and streamlining operations. Whether you’re working with multiple revenue streams or simply want to reduce your tax burden, understanding your options is essential.

This guide crafted by one of the top accounting firms in Texas, will walk you through strategies to restructure your LLC for success.

Why Restructuring Your LLC Matters

An LLC provides flexibility, but as your business grows, your initial setup may no longer align with your goals. Restructuring allows you to:

✅ Save on Taxes: Optimize your structure to lower your liabilities with the help of a local tax advisor in Austin.
✅ Streamline Reporting: Simplify the management of diverse revenue streams.
✅ Protect Your Assets: Isolate liabilities and safeguard your business with the guidance of a trusted Austin accounting service.

Many businesses in Austin, TX, are restructuring to achieve these goals with the support of CPA firms in Austin, Texas like Insogna CPA.

Common LLC Restructuring Options

1. Switching to an S Corporation Election

If your LLC generates significant profits, transitioning to an S Corporation (S Corp) can reduce self-employment taxes.

How It Works:
An S Corp allows you to classify income as:

Salary: Subject to payroll taxes.
Distributions: Not subject to self-employment taxes.

Example:
An LLC earning $150,000 in net profit pays self-employment taxes on the entire amount. Restructuring as an S Corp allows the owner to allocate $75,000 as salary and $75,000 as distributions, saving thousands annually.

This strategy, commonly implemented by your top Austin TX accountant professionals, is ideal for businesses earning over $40,000 annually.

2. Creating a Series LLC for Multiple Revenue Streams

A Series LLC acts like a “parent company” with multiple independent “series” beneath it. Each series can manage separate assets, liabilities, and revenue streams.

Benefits:

Isolate risks within each series.
Simplify management across diverse operations, such as real estate, consulting, or e-commerce.
Centralize financial reporting with the help of an accounting firm in Austin.

3. Establishing a Multi-Member LLC

Adding partners to your LLC opens doors for new opportunities while sharing operational risks.

Advantages:

Flexible profit-sharing options.
Reduced personal liability.
Strengthened credibility with clients and investors.

Formalize roles and contributions in an operating agreement, which Austin accounting firms like Insogna CPA can help you draft.

4. Forming a Management LLC

Businesses managing multiple entities can create a management LLC to oversee shared operations.

How It Works:

Centralize payroll, HR, and administrative tasks.
Allocate management fees to reduce taxable income for individual entities.

Your local CPA in Austin, Texas can help you determine the right structure to simplify reporting and maximize deductions.

How Restructuring Impacts Taxes

Here are key tax benefits of restructuring:

Lower Self-Employment Taxes: S Corp elections minimize Social Security and Medicare taxes.
Maximized Deductions: Strategic allocation of expenses improves savings.
Enhanced Asset Protection: Protect personal and business assets with LLC strategies supported by Austin CPA firms.

💡 Steps to Restructure Your LLC

1. Evaluate Your Current Structure: Identify inefficiencies in taxes or liabilities.
2. Set Clear Goals: Define objectives like tax savings or streamlined operations.
3. Partner with a Tax Advisor in Austin: Work with a trusted Austin accounting service like Insogna CPA.
4. File Necessary Paperwork: This may include Form 2553 for S Corp election or registering new series in a Series LLC.
5. Update Financial Systems: Implement updated processes for reporting and compliance with help from an accounting firm in Austin.

Real-World Example: Success Through LLC Restructuring

The Challenge:
A South Austin e-commerce entrepreneur managing three product lines under one LLC faced tax inefficiencies and operational complexities.

The Solution:
With the help of CPA South Austin professionals at Insogna CPA, they:

Transitioned to an S Corp for tax savings.
Established a Series LLC to isolate risks and simplify reporting.

The Outcome:

Saved $12,000 annually in taxes.
Improved financial transparency and liability protection.

Why Choose Insogna CPA?

As one of the best CPA firms in Austin, Insogna CPA specializes in helping small businesses restructure LLCs to maximize tax savings and streamline operations.

With decades of experience, our team offers:

Tailored Strategies: Custom plans based on your business’s goals.
Expert Guidance: In-depth support from top Austin TX CPA firms.
Proactive Planning: Future-focused strategies to support growth.

Ready to restructure your LLC?

Restructuring your LLC isn’t just a financial adjustment—it’s a way to position your business for long-term success. Whether you’re transitioning to an S Corp, forming a Series LLC, or centralizing operations, the right structure can unlock opportunities for growth and tax savings.

Ready to get started? Contact us, one of the top accounting firms in Texas, to explore your options and optimize your LLC structure.

Real Talk on Tax Returns: Why Direct Communication Matters for Busy Business Owners

Why Busy Business Owners Need Direct Access to Their CPA

When you’re running a business, every minute counts. You’re managing deadlines, making decisions, and focusing on growth—so waiting for answers from your CPA is the last thing you need. Yet, too often, business owners find themselves stuck in a loop of vague updates or delayed responses.

At Insogna CPA, we know how frustrating this can be. That’s why we prioritize direct, clear communication. When you have questions, we give you prompt, accurate answers—no barriers, no intermediaries, and no unnecessary back-and-forths.

Avoiding Delays with Direct, Clear Answers

Imagine needing a critical financial update but having to wait days—or weeks—to hear back. The delay doesn’t just cause stress; it can stall important business decisions.

Our approach eliminates these bottlenecks. Here’s how we ensure you stay informed:

1️⃣ No Middlemen: You’ll communicate directly with our experts, not an assistant or general support line.
2️⃣ Timely Responses: We respond to inquiries within 1–3 business days, ensuring you’re never left waiting for answers.
3️⃣ Efficient Problem-Solving: Instead of endless emails or calls, we provide clear, actionable solutions so you can move forward quickly.

With Insogna CPA, you get the information you need when you need it—because your time is too valuable to waste.

What Direct CPA Communication Looks Like

Direct communication isn’t just about speed—it’s about clarity and trust. Here’s what you can expect when working with us:

✅ Straightforward Answers: We cut through the jargon and explain complex issues in a way that’s easy to understand.
✅ Accurate Insights: Whether it’s a tax question or a business strategy discussion, our advice is grounded in deep expertise.
✅ Tailored Support: We focus on your specific needs, offering guidance that aligns with your business goals.

This approach not only saves time but also builds confidence, so you can tackle tax season—and every financial challenge—with ease.

Get the Information You Need, When You Need It

With Insogna CPA, you’ll never feel like you’re in the dark. Our direct communication approach ensures that you’re always informed and empowered. From answering quick questions to guiding you through complex tax strategies, we’re here to make your life easier.

When you work with us, you’ll spend less time chasing your CPA and more time focusing on what really matters: running and growing your business.

Ready for a CPA That Works at Your Speed?

Tax season doesn’t have to be stressful or full of delays. At Insogna CPA, our commitment to direct, proactive communication puts you in control. Let us show you how fast, clear answers can transform the way you approach your finances.

Don’t settle for slow responses. Contact us today and experience the difference that direct, expert communication can make for your business

Invest in Your Business: Tax-Smart Strategies for Scaling as a Freelancer

Freelancers often face a unique challenge: balancing the desire for growth with the need to manage tax burdens effectively. Reinvesting profits wisely can fuel scalability while minimizing tax liabilities, ensuring your business thrives in the long run.

In this blog, we’ll explore strategic investments for freelancers, offer tips on tax-smart decisions, and demonstrate how Insogna CPA can guide you through building a scalable, financially sound business.

Why Reinvesting is Essential for Freelancers

As a freelancer, your income is your business’s lifeline. Reinvesting profits can unlock opportunities for growth, such as attracting higher-paying clients, increasing efficiency, or expanding service offerings. Strategic reinvestment helps you:

✅ Enhance Efficiency: Upgrading technology or automating tasks saves time and effort.
✅ Increase Revenue Potential: Hiring assistance or improving marketing can expand your reach.
✅ Reduce Tax Liabilities: Business expenses lower taxable income, creating a win-win scenario.

Tax-Smart Reinvestment Strategies 💡

1. Invest in Technology and Tools

Freelancers rely heavily on technology to deliver quality work. Tax-deductible expenses in this area include:

📌 High-performance hardware: Laptops, desktops, or tablets.
📌 Software subscriptions: Tools like Adobe Suite, project management platforms, or industry-specific applications.
📌 Automation tools: Save time with scheduling software, invoicing tools, or CRMs.

Pro Tip: Bundling technology upgrades before the year-end can reduce your taxable income while positioning your business for better efficiency.

2. Upgrade Your Workspace

Creating a professional, functional workspace not only improves productivity but also offers tax advantages:

💡 Home office deductions: Deduct a portion of your rent, utilities, or mortgage if you have a dedicated workspace.
💡 Office equipment: Printers, ergonomic chairs, or standing desks can be expensed.

Ensure you maintain clear records of purchases and their use to maximize tax deductions.

3. Hire Strategic Help

Scaling often requires delegation. Bringing on subcontractors or virtual assistants allows you to focus on high-value tasks. Tax-deductible expenses include:

✅ Contractor payments: Wages or stipends paid to freelancers or assistants.
✅Professional services: Hiring accountants, marketers, or business coaches.

Pro Tip: Work with Insogna CPA to ensure proper classification of contractors and compliance with IRS regulations, avoiding costly penalties.

4. Boost Your Brand with Marketing

A strong personal brand is critical for freelance success. Tax-deductible marketing expenses include:

💡 Website development and maintenance.
💡 Social media advertising and SEO campaigns.
💡 Professional photography or videography for branding.

Strategic marketing investments can pay dividends by attracting premium clients and increasing your reach.

5. Expand Your Knowledge

Education is a powerful investment in your business. Deductible learning expenses include:

✅ Courses or certifications to improve your skills or expand into new services.
✅ Conferences or seminars to stay updated on industry trends.
✅ Books or online resources that enhance your expertise.

Pro Tip: Keep detailed records of educational expenses to substantiate deductions if audited.

Tax-Planning Tips for Freelancers

1. Plan for Quarterly Taxes

Freelancers are required to pay estimated taxes quarterly. By reinvesting in your business throughout the year, you can reduce taxable income and potentially owe less.

2. Depreciate Large Purchases

Some significant expenses, such as office furniture or high-cost equipment, can be depreciated over time rather than deducted upfront. Insogna CPA can help you decide the best approach based on your income and long-term goals.

3. Set Up a Retirement Plan

Freelancers can save on taxes while preparing for the future with plans like a SEP-IRA or Solo 401(k). Contributions are tax-deductible, offering immediate and long-term financial benefits.

4. Leverage Section 179 Deductions

The Section 179 deduction allows you to write off the full cost of qualifying equipment or software in the year of purchase, rather than depreciating it over time.

Pro Tip: Insogna CPA can ensure you’re optimizing these deductions while staying compliant with IRS rules.

A Strategic Path to Scalability

Reinvesting profits strategically helps freelancers scale without compromising financial health. Here’s a step-by-step guide:

📌 Analyze Your Cash Flow: Determine how much you can reinvest without jeopardizing stability.
📌 Prioritize Investments: Focus on high-impact areas like technology, talent, and marketing.
📌 Monitor ROI: Measure the success of each investment to refine future strategies.
📌 Consult a Tax Advisor: Work with us to ensure your decisions align with tax-smart practices.

Looking to scale your business?

Strategic reinvestment is essential for freelancers looking to scale their businesses while minimizing taxes. Whether it’s upgrading technology, hiring help, or enhancing your brand, every dollar reinvested wisely moves you closer to your goals.

For Rental Owners: What does the IRS consider a passive activity?

Rental activities typically fall under “passive” activities. This means rental losses can only be deducted against passive income, not nonpassive income like wages or investment earnings.

If you’re unable to use rental losses in a given year, don’t worry—they carry forward indefinitely until your passive activities generate enough income to offset those losses.

However, if you “actively participate” in managing your rental property, you may be able to deduct up to $25,000 of losses against nonpassive income. Active participation includes making important decisions like tenant approval, setting rental terms, and overseeing major repairs. Even if you’re not hands-on all the time, arranging services or maintenance for the property can count as active participation.

The following flowchart can help determine if your Airbnb or rental property qualifies as a passive activity or not:

❓ Did you spend more than 500 hours working on your rental activities this year?

💡 If no, did you work at least 100 hours, and more than anyone else on this activity?
- 📌 If not, did you materially participate in at least 5 of the last 10 years?
  - 📌 If no, this is likely a passive activity.

❓ Was the average rental period 30 days or less?

✅ If yes, did you provide “significant services” (like housekeeping or meals) to guests? If so, this might be treated as non-passive.
- 📌 If the average rental was 7 days or less, your property should also be classified as non-passive.
- 📌 If the average rental exceeds 7 days, it likely remains a passive activity.

Tasks that count towards the 500-hour and 100-hour rules include showing the property to renters, reviewing leases, bookkeeping, scheduling repairs, and even managing vendors and staff.

Wondering if your rental qualifies as passive or non-passive income?

Get clarity before tax season hits. Contact us today, and we’ll help you navigate the complexities of rental activities and maximize your deductions.

How an S-Corp Can Reduce Your Taxes in 2024

Most businesses begin as a sole proprietorship because it’s easier to start and requires less paperwork and regulatory overhead. It generally costs less than filing as a Limited Liability Company (LLC) or Incorporation (INC).

However, each of these legal statuses has certain tax strategy advantages, so it’s important to carefully consider which status is:

1️⃣ The best legal structure for your business goals.
2️⃣ The most tax beneficial, keeping more money in your pocket annually.

❓ LLC and Inc Can Elect S-Corp Status

If you choose an LLC or INC, you can elect for either entity to be treated as an S-Corp with the IRS for tax purposes. This election can save your small enterprise from paying more to the IRS.

💡 The Tax Advantage of S Corporations

For those choosing either the LLC or INC entity, S-Corp status allows the business to use “pass-through taxation” (i.e., business income goes directly to owners instead of the corporation). This allows the business and owner to potentially save money, avoiding the payroll taxes on LLC profits or the double taxation faced by INCs when distributing money.

📌 Brief Overview of an INC Structure

Protection from Liabilities
INC (Incorporated) status offers business owners (i.e., shareholders) the strongest protection from business liabilities, as it is a separate legal entity from the owners and shareholders.

Shares and Shareholders
With an INC, the business can also sell shares of stock and offer employees a stock option plan. INCs may have any number of shareholders. Note that most public companies you may hold shares of stock in are generally structured as an INC too.

C-Corp and Double-Taxation
Keep in mind that when setting up an INC, the IRS automatically treats the entity as a C-Corp, where all profits and losses flow to the corporation. Taxes are paid at C-Corp rates, and the only way to extract money for a shareholder/business owner is through dividends or W2 salary. This setup results in “double taxation”—first at the corporate level and again at the individual level on dividends and salaries. Electing S-Corp status allows you to avoid this by paying payroll taxes only on a reasonable W2 salary, with the rest taxed at your individual effective tax rate.

📌 Brief Overview of an LLC Structure

Brief Overview of an LLC Structure

Flexible Business Structure
A Limited Liability Company (LLC) is the most common alternative to the INC. The business structure of an LLC is more flexible than an INC, easier to maintain without the required annual meetings and minutes, and still provides a good deal of protection from legal liability, as long as the owner maintains a clear corporate veil by separating business and personal finances.

Less Paperwork and Administration
LLCs require less paperwork to form than S Corps. For one thing, there is no board of directors. The LLC’s owners just file the Articles of Organization for the LLC with the state agency. LLCs are then required to get an EIN from the IRS and maintain the necessary licenses and permits, just like INCs.

Tax Election Choices
An LLC has one class of shareholders/members and can choose how it will be taxed—Sole Proprietorship (SchC) filing, Partnership, S-Corp, or C-Corp. The tax election depends on your business and its needs. LLCs are generally classified as pass-through entities, with any profits and losses passing through to the members and reported on their personal tax returns unless they opt for C-Corp taxation.

❓ How Can Electing S Corp Status with the IRS Benefit Me?

S Corp Election Does Not Change the Business Legal Structure
Becoming an S-Corp is done strictly for tax purposes. A business stays the same legal structure of an INC or LLC, but by electing S-Corp status, the business can have its profits and losses pass through to individual tax returns, potentially saving on taxes.

Minimizing Payroll Taxes with S-Corp Status
The main reason for choosing to elect S-Corp tax status is to avoid paying payroll taxes on all of your profits and avoid double taxation. Instead, an S-Corp election allows business owners to pay themselves a “reasonable” salary, with payroll taxes only on that portion. This can be determined by taking an S Corp Compensation Test to figure out what the “reasonable” salary should be.

Is Electing S Corp Status the Right Choice for My Business?

S-Corp Is Not Ideal For Everyone
While all S-Corp profits and losses are passed through to an individual 1040, making the S-Corp election is not necessarily beneficial for all businesses. Startups looking to take on equity investment, businesses offering equity compensation, or partnerships splitting profits and equity interests are examples where an S-Corp election may not be the right choice.

Maintaining S-Corporation Tax Election
To maintain an S-Corp tax election, the business must be a U.S. LLC or INC with only one class of stock and fewer than 100 shareholders. All shareholders must be individuals, estates, or specifically qualified trusts. Each shareholder must consent in writing to the S-Corporation election, and each must be a U.S. Citizen or permanent resident alien with a U.S. Social Security number.

S Corp Must Have a December 31st Year-End
The tax year for an S-Corp must end on December 31st.

Changing Tax Election with the IRS
You can always update your tax election with the IRS at any time. There may be tax consequences for doing so, but it’s possible by a majority shareholder vote. Note that with the 199A (Qualified Business Income Deduction) deduction, electing S-Corp status could further maximize your tax savings depending on your industry.

Need Help?

We have been helping small business owners identify their business entities for over a decade. Plus, we advise on how to best set up your entity to maximize your tax benefits. Contact us today to start saving on your business and individual taxes tomorrow.

Do Olympians Pay Taxes on Their Medals? Tax Hacks for Winning Athletes

Hey there, athletes! It’s your friendly CPA team at Insogna CPA, here to share some smart tax tips tailored for your Olympic triumphs in 2024. Taxes might sound like a hurdle, but we’ve got the insider tips to help you keep more of your hard-earned prize money and NIL (Name, Image, and Likeness) earnings in your pocket.

❓ What Are Taxes?

When you’re cashing in on those Olympic prizes and NIL earnings, Uncle Sam wants a slice of that pie. And it’s not just federal income tax you need to think about—FICA payroll taxes are in play too, covering Social Security and Medicare.

But don’t stress! We’re here to break down how setting up an LLC-SCorp can help you sidestep some of those tax hurdles and save you money. Think of it as a victory lap for your wallet.

❓What Is My Tax Responsibility?

Whether you’re a gold medalist or just starting to cash in on your NIL, the IRS expects its fair share. But with smart planning, you can minimize your tax bill and keep more of your Olympic prize and NIL money for yourself.

🚩 Consider Setting Up a Business Entity

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

💵 Keep Track of Your Expenses

Every gold medal comes with a price tag, and so do your NIL earnings. Training, travel, equipment—they all add up. But here’s the good news: many of these expenses can be deducted from your taxable income, saving you money.

Keeping organized records is key, so consider setting up a separate LLC account for your business transactions. With a CPA on your team, you’ll know exactly what you can deduct, helping you keep more of your earnings.

💡 Plan for Self-Employment Taxes

As an Olympic athlete with NIL earnings, you’re essentially running your own business, which means you’re responsible for self-employment taxes. This includes both the employee and employer portions of Social Security and Medicare taxes. Planning ahead and setting aside funds for these taxes is crucial to avoid any unpleasant surprises.

Pro tip: A CPA can help you budget and make sure you’re on track with your tax payments, so you can focus on what you do best—winning.

💵 Save for Retirement

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

💡 Understand State Tax Implications

If your Olympic journey takes you across state lines, you might owe taxes in more than one state. This can get tricky, but with a CPA’s help, you can navigate the maze of state tax rules and make sure you’re in compliance no matter where you earn your money.

💬 Seek Professional Advice

Here’s a crucial tip: always seek advice from licensed professionals. A CPA is your go-to resource for managing your finances and taxes, ensuring you’re making the best decisions for your future. Don’t cut corners—invest in quality advice to protect your hard-earned cash.

Ready to score a win for your finances?

Reach out to us today, and let’s make sure your Olympic earnings work as hard for you as you did to earn them. We’re here to help you navigate the tax game and set you up for a financially secure future. Don’t wait—get in touch now and let’s secure your victory lap!