Specialty Fabrics Review September 2019 - 58

FOCUS

BUSINESS

WANT MORE? WE HAVE IT!

Search "tax write-offs" at
www.SpecialtyFabricsReview.com

when it comes to sales, financing and taxes.
Keep in mind that the LLC or incorporated
new branch or startup won't escape IRS
scrutiny under the hobby rules.
Corporations, LLCs and limited
partnerships do offer protection to their
owners or shareholders for any debts of the
entity. But the entity's corporate veil can
be pierced if a creditor can show the entity
was the alter ego of the owners. Sometimes
it is enough that the owners are majority
shareholders, exercise substantial control over
the incorporated operation, or regularly use
corporate funds to finance personal expenses.
THE RIGHT FUNDING
In good times or bad, one of the hardest
questions to answer is what kind of funding
should a startup or expanding fabrication
business seek? Any quest for business funding
begins with an understanding of the various
types of financing, where that funding may

Registration
Opens
Fall 2019!

A brand-new format!
The inaugural Geosynthetics Conference: CASE STUDIES,
which will run March 8-10, 2020, in Charleston, S.C.,
is a must-attend event for geotechnical practitioners,
designers, regulators, contractors and installers.
EXPAND your knowledge
EXPLORE in-depth 30-minute case studies
CONNECT with industry colleagues
EARN up to 17 pdh(s)

More Information? Contact Barbara J. Connett, Secretary General at
+651 225 6914 or bjconnett@ifai.com. Questions About Exhibiting?
Please contact Mark Berriman, at meberriman@ifai.com.

be found, and at what cost. Generally, there
are two basic ways to fund a business: debt
financing or equity financing. With equity
financing, capital is received in exchange for
part ownership in the operation or business.
With debt financing, capital is received in
the form of a loan, which must be paid back.
Putting money into the fabrication
business or taking money from the business
is not something to be tackled by amateurs.
In simplified terms, money invested in the
business can be withdrawn with a tax bill
on any profits from the sale of that capital
investment. On the other hand, a loan made by
a canvas professional to his or her business can
be repaid tax-free if the ever-vigilant IRS accepts
it as a bona fide, arm's-length transaction.
THE PASSIVE TRAP
So-called material participation rules limit
the deduction of losses from so-called passive
activities, ventures where the taxpayer does
not "materially participate" in the activity.
Generally, losses from passive activities may
not be deducted from non-passive income
(for example, wages, interest or dividends).
Usually, someone is said to materially
participate in an activity if he or she participates
in the activity on a regular, continuous and
substantial basis during the year, or the
individual participates in the activity for more
than 500 hours during the year.
HELPFUL HELP
Having access to legal expertise is extremely
important when creating or expanding a
business to help the business survive and
grow as rapidly and efficiently as possible.
In addition to legal advice, accounting
advice such as setting up the operation's
books, auditing, payroll services, taxes and
retirement planning might benefit both new
and expanding fabrication operations.
The first step in finding the right
professional requires an inventory of what
you and the business or startup need in the
way of services and advice and how much you
can afford to pay for them. It's also important
to determine beforehand just how much of the
work you and your business will do and how
much of it will be done by professionals.
Mark E. Battersby writes extensively on business,
financial and tax-related topics.

58 REVIEW SEPTEMBER 2019
http://www.SpecialtyFabricsReview.com
Specialty Fabrics Review September 2019

Table of Contents for the Digital Edition of Specialty Fabrics Review September 2019
