How Can I Utilize a Board Meeting for Tax Savings?Oct 19, 2022
Last week Attorney Andrew M Ayers discussed What You Need to Do to Maintain Your Corporate Entity and one of the things he discussed is corporate meetings, minutes, and an annual meeting.
Be sure to talk to your attorney about what type of meetings or board may specifically be required for your business.
With that being said, today we want to focus on how we can do tax planning around corporate meetings.
What Is a Board of Advisors (aka Advisory Board)?
Most businesses will either be able to have a Board of Advisors or Board of Directors. Traditionally you can have a board of advisors in sole proprietorships and LLCs. Generally you would have a more formal board of directors with a corporation. For the most part, implementing the boards in your corporate documents is quick and easy but be sure to check with your attorney to ensure you are setting both up properly.
A Board of Advisors is simply a group of people that are appointed to provide advice, counsel, and support for your business. Think of it as a small group that you get together with on a regular basis (monthly, quarterly, or annually) to discuss your business and get guidance from.
The members of your advisory board could be family members, friends, colleagues or really anyone you want to bring in to give a good outside perspective and bring guidance to you and your business.
How Can I Utilize a Board Meeting for Tax Savings?
Now that we have a general idea of what a board is, lets talk about the fun part, tax advantages!
When you hold these regular board meetings, the travel, meals, etc. related to the meetings are tax deductible. Remember though that any entertainment would still not be deductible.
This provides a great opportunity to discuss the current and future state of your business with your board while being able to deduct some travel and meals that are associated with it.
Often times we see business owners involve their family on their board of advisors and as you can imagine, this provides a great tax planning opportunity. What better way to not only get a tax deduction but get your family involved in your business and be better prepared to potentially pass it on to future generations.
Previously we have also talked about the 14 Day Home Rental Strategy (aka The Augusta Rule). Essentially this is a strategy that you can use to rent your home to your business for business meetings. You can get a business deduction while potentially paying no income taxes on the income.
Having board meetings at your home is a great way to utilize this 14 day home rental strategy and something we talk about all the time to our Tax Minimization Program members.
What Documentation Should I Be Recording?
This is an important piece thing to think about. As with all business deductions, you need to make sure you are dotting your i's and crossing your t's with full documentation.
- The meetings must be both ordinary and necessary. Basically, do not abuse this and go over board.
- Have a record or minutes of the meeting on file to outline what was accomplished and discussed.
- Include: who attended, location, time spent, agenda items, outcomes, etc.
- The more documentation you can provide the better.
- Keep Receipts and Store Them Digitally
What Other Benefits of a Board Are There?
We are tax planning experts so of course we are going to be excited about the tax strategy around holding board meetings but the benefits go much further than that. Here are just some ideas that come to mind:
- Get Insights from Others
- Building a business can be lonely and bringing in outsiders to get another prospective on company status and direction can go a long ways.
- They May Be Required
- Depending on your entity structure and location you may be required to hold an annual meeting which can also help with asset protection.
- Be Held Accountable
- Knowing that periodically you are going to be coming to your board and giving status updates can often times provide motivation to get things done. The last thing you want is to go to your board meeting and tell them you accomplished nothing from the last meeting.
- Planning and Alignment
- So many small business owners do not do any planning, and I get it, they are stuck in the day-to-day of their business. Having a board can provide a great planning opportunity so you can be encouraged to present on the future of the business.
- Stress Relief
- Many of things we discuss here will help reduce the stress of the business owner but if nothing else, having a regular scheduled meeting to get away from the day-to-day and look at your business from a higher level can be extremely refreshing. Not to mention, a little time away hanging out with your closest advisors can provide a reboot as well!
- Tax Benefits
- Deductible business expenses around the meetings.
- Taking advantage of the 14 day home rental strategy.
Now, go and start thinking about who you want to be on your board and start saving taxes today!
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