New Tax Rules: Are CEOs & Business Owners Ready?

New Tax Rules: Are CEOs & Business Owners Ready?

The New Tax Plan: What It Really Means for CEOs, Business Owners, Investors, and Executives

The new tax overhaul has caused quite a stir in the 7 week’s since its creation. Much has been written and discussed in those 7 weeks on this polarizing plan, which can make it a little challenging to wrap your head around all of its intricacies. Nevertheless, no matter your views, you MUST be ready & understand what the changes mean for your business!

The changes for individuals include new tax bands, greater exemptions from estate tax & expands child tax credit but the changes for businesses and corporations are far more significant.

To help you understand the most important aspects of the new tax rules, specifically the IMPACT, the Habits of Profitability™ team is here!  

Slash the Corporate Tax Rate:

One of the biggest elements is a reduced corporate tax rate from 35% to 21%. This proposal is being driven as a response to the many large US created corporations who have registered their businesses in places such as Ireland where tax rates are much lower than in the US.

CEOs, this is not just a massive cash injection and should not be treated as a money just lying around. Yes, large corporations will likely issue bonuses and more, but unless you are one of those large $500 million businesses, you need to plan accordingly. Why? Because your competitor just received the same adjustment. You still have to compete and those who strategically plan in alignment with their detailed financial awareness of the business, will create 3x or even 5x plus return with the new lower rate. Financial awareness and confidence is key!  

Change How U.S. Multinationals Are Taxed:

Regardless of where their income is earned, all U.S. companies currently have to pay taxes on all their profits to the US Government.

The new rule is related to the US to a territorial tax system, which means how profits are earned and how much taxes a company has to pay is shifting right away.

This new tax payment is 15.5% on cash assets and 8% on non-cash assets (e.g., equipment abroad in which profits were invested).

Removing the complications, the same scenario applies as the CEO. You must not simply react. In the Habits of Profitability™ community, we constantly drive CEOs and investors to compare “what if” scenarios. You best have serious confidence in your current accounting structure and operations, but “what if” scenarios allow the CEO and executive team to see the financial impact beyond the bottom line, which is far more important for stability long term. A financial bump or win today is nothing more than a bonus. A tax strategy that plays out different scenarios, the habit of “what if,” allows a CEO to increase their competitive advantage longterm, not just hit the numbers for 2018.

Reduce The Tax Burden on owners, partners and shareholders of S-corporations, LLCs and partnerships:

You are likely used to owners, partners & shareholders of S-corporations, LLCs & partnerships paying their part of their business’ tax  through their individual tax returns. The pass through change has been split into areas. We are going to lean on the great explanation from Forbes for this one (see below).

We hope this helps, but the most important aspect is confidence and clarity on your financial performance and your numbers today. Every red flag has significant impacts each time you kick the can down the road. You can prepare for these changes and limit the impact they have by ensuring you follow Your Habits of Profitability™ Team.

For some additional info, here is a great review by Forbes:

https://www.forbes.com/sites/robbmandelbaum/2017/12/22/what-the-gops-final-pass-through-tax-cut-means-for-business-owners/#3f4b4c7452b2

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