ForumsStarting a Business

I am a licensed CPA in both CA & AZ (not in VA though) and have a couple of suggestions for you on your business organization and other questions you had in this post.

The answer to your first question about whether to do another DBA for your spinoff business vs. a separate legal entity really depends on many different factors which really ONLY your CPA, knowing your overall financial picture can advise you on (if they are any good of course). Not all CPA's are "out-of-the-box" thinkers so be sure you truly "believe" that your CPA is the best and brightest you can afford. A good CPA can save you big $$$ in your annual tax bill, so be picky! Your personal financial situation may dictate changing business entity structures over a period of years. For example, IF you have any other sources of income or write-offs/expenses that fluctuate significantly over a given period, OR, if you expect them to fluctuate in a particular year, you need to work closely with your CPA to optimize your tax strategy to create a synergy between both your personal tax picture, as well as your business tax picture. Unlike many CPA's in the biz, I typically recommend a C-Corp structure vs. an S-Corp structure for my clients with Net Operating Income below $250K, and that have only a few employees like yours. Many would argue the double taxation rule against the C-Corp., but I can typically show (especially for individuals over 50) significant tax advantages, both long and short term for the C-Corp structure (not ALWAYS of course, but MOST of the time). This was not your question though. The answer I have for your initial question about doing a dba vs. separate entity is that you really need to work closely with a skilled accountant IF you expect either of your "businesses" to post significant profits or losses, and especially if you have significant personal expenses (like medical for example), or if you expect to have these in the future. As for the question about writing off a portion of your home for business activity, your entity structure really makes no net tax difference UNLESS you have a C-Corp that leases the space from you personally, in which case, this is a nice way to transfer money out of your corporation without incurring "self-employment" tax in the process. A little complicated to explain this concept thoroughly here though. The trick with a C-corp is to figure out ways to transfer money/profits to yourself without incurring the dreaded 15% SE tax. There are PLENTY of ways to legally do this if you have a sophisticated or interested enough accountant. Last plug for C-corps... C-Corps allow you much more flexibility in managing how much income/loss you pull onto your personal tax return each year, allowing you to manipulate/manage (legally) your earnings/writeoffs so you don't get whacked on AMT for a given year if you happen to have a really great year, OR, better still, so you can "bank" your losses in the corp without losing schedule A deductions in the process. Sorry this is likely way more info than you were looking for, but hopefully it will be helpful to some.