Group,
I am about to start a business that has a very high profit margin built in like 1000%. per item cost. i don't want to be taxed on this huge profit so I had the idea of buying equipment or land with the profits.what are the laws associated with this?
Well, if you are so lucky as to make this wonderful business model successful, you'll have the nice problem of paying taxes on the profit under whatever business organization you choose.
What you spend the profits on is immaterial to the taxes owed on the profits themselves.
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On 29 Oct 2005 20:13:06 -0700, in alt.accounting snipped-for-privacy@bellsouth.net wrote in :
You really need to talk to an accountant and lawyer before you do anything else. Taxes are not charged on the per item profitability, but those who try to evade taxes are often imprisoned.
About the only items that have margins like the ones you talk about are those with high initial fixed costs. With questions like this, I don't think you understand business well enough to run a business.
So your telling me that if i make 20 dollars per item and i am not allowed to spend that money in any way to build the business.
generally the irs will tax you on profit... no matter what or how you decide to spend it or invest it afterward.....profit is taxable...
wrote
The cost of land is never deductible because it's an undepreciable asset. This results in no deductible expense, the cash gone, and the tax on the prifit due.
Other ~business~ equipment purchases are deductible through depreciation (generally over 3, 5, or 7 years, but Section 179 could be of some advantage.
As other posters have mentioned, the profits will be taxed, so plan on it.
No, not that you can't spend the money in _any_ way, but that there are limitations on what are/would be legitimate expenses plus much else that an accountant can tell you about that would allow you the most favorable (but importantly still legal) tax status for your particular situation--you're original post sounded like an attempt to avoid taxes but what certainly didn't sound like legitimate business expense.
you can spend $20 you make (after taxes) in any fashion you would like....
On 30 Oct 2005 09:13:17 -0800, in alt.accounting snipped-for-privacy@bellsouth.net wrote in :
You aren't taking into account that the cost of selling the goods and the cost of operating the business will also be deducted.
Of course, unless you are selling drugs, software or something else that is effectively intellectual property only, you won't have a ten-fold markup.
"David Jensen" wrote
WHAT ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !
You mean to tell me that my "Turn $10 into $10,000,000 in one evening surfing the net" business activity won't return ten-fold on my investment?
I mean, what next?
You'll probably tell me that my friend from Nigeria isn't going to wire me a finders fee on Monday like he promised.
its easy to have a ten fold markup. You just need a product that people like and get it at a very low price. I have several times made over 10x profit margin on a single item often more. so you can't tell me that it can't be done. if you disagree then you probably are in the wrong business.
On 30 Oct 2005 21:00:01 -0800, in alt.accounting snipped-for-privacy@bellsouth.net wrote in :
Whatever.
You're the one trying to find out how to engage in tax evasion.
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