by Susan E. Campbell
Area experts say that a healthy economic environment and strong growth prospects in particular sectors are giving a positive message to businesses all around the Capital District: It’s a good time to be in business right here, right now.
“2018 is an ideal time to begin a business. Albany creates a lot of employment as well as opportunities for vendors supplying the Capital, from paper and hardware to restaurants and other service areas,” said Anthony Ianniello, an attorney and president of Ianniello Anderson PC. “There is a stable economic environment in the Capital Region.”
Moreover, the nano-tech center and colleges in and around Albany, and GlobalFoundries headquartered in Malta, create excellent opportunities for suppliers of both materials and expertise, he said.
Ianniello’s advice for ongoing businesses in the service industry is to “drill down on how to best provide services to customers.” To do that, it’s imperative for sales and marketing to be entrenched in the digital world, he said.
“Websites and mobile applications are where people gather information that’s important to your business,” said Ianniello. “A business without digital technology today will fall behind.”
Start-up businesses have always dealt with the decision early on as to which type of structure is best, be it an S corporation, limited liability corporation or proprietorship filing Schedule C with personal income taxes. These are among some common choices that are easier and cheaper to set up than a corporation and that offer a variety of options when it comes to available benefits such as qualified retirement plans.
But now that there is a new tax structure in place for businesses, the best way to set up the new entity may be a more complex decision than before, said Steve Cardinal, a CPA and tax partner with Teal, Becker & Chiaramonte.
“The tax rate on regular C corporations has been reduced to 21 percent,” said Cardinal. “But LLCs and S corporations get a complicated new deduction.”
“Depending on the type of business, there is a 20 percent deduction calculated before income flows to the business owner or partner and which is taxed at the individual rate,” he said.
That means implications for self-employment tax. Cardinal said many business owners filing a simple Schedule C don’t like to calculate and pay the required quarterly self-employment tax estimates, which are essentially Social Security and Medicare taxes.
“But if the business is structured as an S Corp, the entity can pay the owner a salary, deduct withholding taxes, and the flow-through is not subject to quarterly payments,” Cardinal said.
Whether the business is subject to SE tax is one option the company owner has to manage cash flow. Another is the accounting method chosen.
“With the cash method, income and expenses are accounted for when they are received and paid. With the accrual method there may be income not yet paid that year, and at the same time it may be possible to push expenses into the next fiscal year,” said Cardinal.
“You can control income more on a cash basis,” he said. “But you have to keep in mind the timing if you do push income into the next year and then decide to make some large capital expenditures, such as equipment.”
“Starting a new business is not something that can be done easily online,” said Ianniello. “In fact, you can put your company in danger by the decisions you make early on.”
“Even something as simple as choosing a name, which might be acceptable in the Secretary of State’s office but may be trademarked or copyrighted elsewhere, can lead to a cease and desist order down the road,” he said.
This is the year for all businesses to get serious about cybersecurity, reach out to a specialist and follow their advice, Ianniello said. His own firm recently went through an extensive security audit.
“Despite every effort to protect themselves, even multinational corporations have been victims of hackers working 24/7 all over the world,” said Ianniello. “Every day we hear of larger firms being hacked, so just think of what happens to a smaller business.”
“Smaller businesses are prime targets because their protections are generally not as robust,” said Ianniello. “You cannot protect from hackers without professional help. To do it on your own would be like a doctor working on his own illnesses.”
Cardinal said it is important to let your accountant know your business plans, “and if you have an attorney, make sure your law firm is involved in your decisions as well. Make sure all your advisors are on the same page.”