Creating a Separate Entity for Tax Resolution

One of the big questions I get asked by CPAs, EAs and attorneys is:

Should I set this up separate and apart from my regular accounting, tax or law practice?

The answer is a resounding yes. And let me explain the two major reasons why you want to set this up as a separate entity.

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#1 Biggest Reason: Advertising restrictions that your State Board of Public Accountancy and/or your State Bar, whatever state you're in; you're able to avoid most of the insane advertising restrictions that those bureaucratic Agencies put on you if you set this up as a separate LLC or an 1120 sub-chapter S corporation, because now the firm is marketing and operating as a tax resolution firm, not a Professional Corporation. You're not under all those restrictions of the State Bar or the State Board of Public Accountancy as a non-professional corporation.

#2 Biggest Reason: is upon "exit", or when it's time to sell. I'm a big believer with starting with the end in mind and work backward. When you sell an accounting or tax practice the most you can hope for is 1X gross. Additionally most law practices are never "sold", they're just merged with another law practice. But creating a separate entity, such as an 1120S corporation or LLC, is so much more valuable to you upon exit because it's valued at a multiple of EBITDA. EBITDA means earnings before interest, taxes, depreciation and amortization. These multiples are generally 4X-6X.

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