Incorrect ownership nearly cost a Veterinarian $68,000 in taxes.
Angie M Grainger
Because the veterinarian industry is in a state where large corporations are buying up smaller practices, local veterinarians can see a significant influx in cash if they sell their practice.
The difference between planning in advance for your sale and waiting until after could cost you millions in taxes.
For example, imagine one veterinarian builds up multiple vet practices from scratch, and then sells them for hefty gains a few years down the road when they 'ripen'. With good tax planning, these gains can be deferred and the cash is still available to build more practices—all that’s left to do is repeat the cycle!
But if another veterinarian only comes to us after their sale is completed, you can imagine how scarce the options are that we have left to work with!
This is exactly what happened to one veterinarian who came to us after the sale was completed there wasn’t anything we could do to save them from the $7m tax bill. It was just too late.
When you get to the place in your expansion where you don’t have a formula that works anymore for your wealth building, it might be time to hire some expertise to setup a machine for you. This machine can tend to create dozens of entities such as LLCs, trusts, S-Corps, C-Corps, etc. and depending on which entity owns which type of income, it can make a difference in your taxes.
When we dove in and developed a clean net worth statement for our client, we could then see exactly which entity owns what and why. In doing this we found a mistake.
One entity showed the ownership incorrectly, which flowed the profits into a higher tax bracket. By straightening this up, we got over $200,000 of income into the correct entity and were able to reduce the tax bracket from 37% down to 20%—that’s a $68,000 tax saving!
The client is so much more confident about their finances now knowing that someone has taken the time to track down all the ownerships and understand their entire financial picture.
That's why we encourage you to have a Finance Director running your personal finances for you—to keep on top of things like this so nothing slips through the cracks.
Book a call with us today.