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Avraham "AY" Rappaport, CLTC
President, Financial Professional
Yaniv "Jay" Natanov
President, Financial Planner
Eli Rappaport
Vice President, Financial Planner
Shlomo Rosenstein
Financial Professional
Ozzie Marizan
Financial Planner
Joseph Greer
Employee Benefits Administrator
Dylan Pinsky
Client Relations Manager
Premier Financial
6395 Dobbin Road, Suite 102
Columbia, MD 21045
Phone: 240-309-6001
Email: dylan.pinsky@prudential.com
Website: premierfinancial1.com
March/April 2024
Tips for Sole Proprietors
As sole proprietor of your small business, you’re responsible for everything from filing taxes to setting up your retirement plan. Your financial and tax professionals can help you take advantage of retirement plan and business deductions to help reduce your income tax bill.
First Up: A Retirement Plan
A solo 401(k) plan is a popular choice for sole proprietors. The business owner contributes to the plan as both employer and employee, up to the annual contribution limit for 401(k) plans. A SEP (Simplified Employee Pension) IRA is another option for sole proprietors or small businesses with only a few employees. Only the employer is allowed to make contributions to the plan. The same percentage of compensation must be contributed to employee accounts as the employer contributes to his or her own account.Line Up Your Deductions
With a sole proprietorship, all business income and tax deductions are reported on your individual income tax return. Your tax professional can help you make the most of deductions that can lower your tax bill, including:Health Insurance. You generally can take an above-the-line deduction for the cost of health insurance for yourself, your spouse and your dependents. The deduction is limited by the amount of your taxable income, so it isn’t available if your business has a loss.
Business Expenses. Deductible expenses include utilities, subscription services, travel and capital assets., You may be able to take the home office deduction for a portion of rent and utilities if an area of your home is dedicated exclusively to your business.
Self-employment Tax. Sole proprietors must pay both the employee and employer portion of self-employment tax (Social Security and Medicare.) You are allowed to deduct half the tax on your return.
A Different Business Structure
As your business grows, you may want to consider a different business structure that offers liability protection. An LLC (limited liability company) is the simplest way to structure a business and protect your assets. An S-corporation eliminates your liability and allows you to save on unemployment taxes. However, your Social Security benefits could be reduced. Your financial and tax professionals can help you structure your business appropriately.1054785-00003-00
Premier Financial is not affiliated with Prudential Financial. Premier Financial sells insurance products of Prudential Financial's affiliated insurance companies in addition to products of non-affiliated insurance companies. Premier Financial is authorized to sell and service certain insurance products of Prudential Financial companies as well as use this material. Premier Financial and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Offering financial planning and investment advisory services and programs through Pruco Securities, LLC (Pruco), under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies. 1-800-778-2255. Dylan Pinsky is employed by Eli Rappaport and not The Prudential Insurance Company of America or its subsidiaries.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products and services, but rather provide general information about the subject matter covered only.
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