Tax Structure and Planning Opportunities to Improve Profitability

By: Pat Tabor, Swan Mountain Consulting Group

I was reviewing some financial history of a recreation company with the owner of a business in preparation for computing the value for a potential sale, and what struck me more then anything was looking at how much taxes he paid over the years due to the incorrect use of entities for tax reporting, and failing to avail himself of the best opportunities legally available for reducing the tax burden. Fortunately, he did not encounter any major lawsuit, but I noticed that the real estate of his business was in the same entity that performs the recreation services.  Little did he know, had a big lawsuit hit; he could have lost that real estate!

image shows 4 types of business structure

For years I have been advocating for my clients to consider the usage of multiple entities to effectuate good asset protection as well as reduce the overall tax burden to the least amount legally possible.  If done properly, using multiple entities can accomplish many cool outcomes:

  • Shift income recognition to later years

  • Defer taxes

  • Take deductions for items not typically allowed in other entities legally

  • Insolate from liability

  • Prevent built-in gains

Let’s face it, outdoor recreation company owners work hard for every dollar they make.  I encounter all too frequently, owners not maximizing the accumulation of earnings and enterprise value working towards building wealth. The end result is more or less trading dollars in and out with little to show over the years in wealth accumulation.

Recreation Company owners should look to creating an ownership entity structure that does the following: Achieves good liability protection, defers taxes, minimizes self-employment (SE) tax and allows all owners to legally deduct a percentage of living expenses including mortgage and meals.

Utilizing good tax strategy is part and parcel of being a good business operator. Having said that don’t let the desire to save taxes take you off your primary mission to build and sustain a best-in-class business. There are several legal methods to utilize structure in order to minimize taxes, protect from liability and accomplish strategic objectives. Begin with the end in mind, have a well thought out vision based strategy drive your decisions, including how to manage taxes. And finally, use professionals to the fullest to create leverage, but hold them accountable.

About the Author:

Pat Tabor is the founder and Managing Partner of Swan Mountain Consulting Group.  The firm specializes in providing high level consulting services to the outdoor recreation industry utilizing consultants that have “been there, done that”.  Visit

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