The Smiths (not their real name) own businesses in multiple locations and own the buildings that the businesses are in as well. That’s a smart wealth-building strategy. In fact, in today’s tax world that’s about the only way you’re going to get good deductions for your real estate.

Their previous CPA had them set up 4 LLCs (limited liability companies). That’s also smart because they are able to separate out their assets. But that’s when the plan went strange. They somehow ended up with default taxation (partnership taxation) for the two entities that owned the business and a default taxation (partnership) and S Corporation election for the real estate.

That meant that the business income was subject to self-employment tax. They had a loss to partially offset their normally high income and so the extra cost was only $12,000 in 2007. Luckily we caught it in 2008. We’ll make a late election for the LLC and save them over $50,000 in 2008.

Don’t wait until year end! What can we do to help you now?