Business Magazine | BABM l Accounting

The young workers of Generation Y, also known as millennials, are realizing that their professional options surpass the traditional suit-and-tie business environment of their predecessors. The entrepreneurial attitude is becoming more prevalent with recent college grads, and many are taking control of their financial futures by starting their own companies. Similarly, investors can take advantage of this generation not only through profit, but by taking advantage of tax credits available in technological fields that interest millennials.

Generation Y entrepreneurs have a considerable interest in technology and are becoming more conscious of environmental issues. There are ways to incorporate these concepts into a new business and receive tax benefits for doing so. There are a plethora of new tax credits implemented or upgraded in the American Recovery and Reinvestment Act of 2009. Some of the tax credits offered to businesses by the IRS include:

Additionally, the American Recovery and Reinvestment Act of 2009 offers many incentives to companies in capital and R&D spending that are not just related to technology and energy to include:

Many of the new credits give deductions for businesses actively conducting research and development, as well as owning and operating a company that creates alternative energy. For example, the Renewable Electricity Production Credit offers a tax credit to companies that produce electricity from renewable sources, such as wind. Other credits, like the Alternative Fuel Pump Tax Credit, allow alternative fuel refueling stations placed in service in 2009 and 2010 to take a tax credit of 50 percent of the property’s purchase price.

When creating a company, young entrepreneurs may want to put some money into researching a new product or patent. The IRS allows business owners to deduct most research and development expenditures the first year any such expenses were incurred. In light of the new recovery act, business owners now have the option to take these R&D credits in lieu of electing to take Bonus Depreciation. This provision applies to all property eligible for bonus depreciation that was placed in service from 2008 to 2009.

The advent of technology is one of the many factors that have helped young business owners achieve their goals. The technologically savvy nature of Generation Y is often viewed as a crutch that constantly consumes their everyday lives. In today’s society, someone is always “plugged-in” to a portable music player, surfing the Internet on a laptop, or glued to his or her cellular phone. Generation Y has used this criticism as fuel and subsequently changed the nature of entrepreneurship. The advancement of technology, combined with the overall knowledge of how to use it, is what essentially aids young entrepreneurs in realizing and attaining their business goals. Ben Kaufman, 20, is the founder of a company that makes accessories for the Apple iPod. According to USA Today, Kaufman started the company, mophie™, with financial help from his parents and now possesses over $1.5 million in venture capital. Kaufman’s products are manufactured in China, and he utilizes the Internet to sell his products to eager consumers.

When building a company, one of the key issues is deciding what type of company is best for you. Entity selection is vital to running a successful business, and it is important to understand the pros and cons of each type of entity. For example, a Limited Liability Company, or LLC, is more difficult to set up than either a partnership or sole proprietorship, but running an LLC is significantly easier. When starting an LLC, the owner(s) must obtain licenses and permits, create an operating agreement, and file articles of organization. The main benefit of a Limited Liability Company is the protection against personal liability for business debts. This means that LLC owners stand to lose only the money they personally invested in the company, and therefore, their personal assets are safe.

After creating a business, one may ask, “What can I do to maintain an efficient and successful company?” One answer is to gain an understanding of the financial records of your company. Knowing the difference between an income statement and a balance sheet may seem simple to some; however, it is usually the simple things that cause the most trouble. The ability to comprehend your business financials can minimize fraud. For example, if you employ a worker to keep track of your business expenditures and profits, it’s much more difficult for that employee to steal funds from the company if you understand the layout of your income statement. Your investors will also appreciate your understanding of the company financials.

Another important element is to enter your financial records on a regular basis. Using software like Intuit QuickBooks weekly, or even daily, can help keep financials in order and also help you keep track of your business revenue. Furthermore, personal and business financials should be kept separate at all times! Opening a business-only checking account ensures there will be no gray areas if and when the IRS examines your business records.

So, if you’re an investor keep in mind that the young Generation Y entrepreneurs have a lot to offer in terms of technological savvy and environmental passion that could provide an immediate return in the form of tax credits. If you’re a millennial, surround yourself with people that can help you take advantage of the tax laws to finance your business and get the best return on your investment.

About the Author
Christopher Serrano is an accounting associate in the tax department at Kingery & Crouse, PA. Christopher resides in Tampa with his fiancé Layla and expects to graduate from USF in August 2009. Kingery & Crouse, P.A. is a full service public accounting firm providing audit (including SEC companies), tax and accounting services. You may reach Christopher @ (813) 874-1280 ext 249.

Why Gen Y Businesses Need to Understand Tax Laws