Your CPA Should Be a Partner: LLC, S Corp and Tax Questions Every Business Owner Asks

Most business owners see their CPA once a year. They drop off a folder, hope for good news and move on. I brought on a guest to talk about why that relationship costs owners money, and what a real one looks like: Ryan Mink, CPA, a partner at Suttle & Stalnaker in West Virginia. He has spent 19 years in audit and tax, and he also happens to be my son, so I have heard some of this over the dinner table. It was still a great conversation.

A quick note before we start: this article is general education from a podcast conversation. It is not tax, legal or accounting advice, and Ryan was clear he is not an attorney. Your situation is your own, so talk to your CPA and your attorney before you make any decision about your structure or your taxes.

Do you actually need an LLC?

Ryan's short answer for a brand-new owner: you do not need an LLC to run a business. You can operate as an individual, a sole proprietor. Here is how he framed it. An LLC is a liability tool, not a tax strategy. It does not by itself add deductions or retirement planning opportunities. What it does is put a wrapper around you so that, if something goes wrong in a business with real risk, the problem is aimed at the company instead of you personally. That is a question for your attorney, and it is why many builders choose one.

Ryan also walked through how the structure changes what gets reported. A single-member LLC is generally treated by the IRS as a 'disregarded' entity, meaning it looks through the LLC to you as the individual. Add a second owner, even a spouse, and you become a partnership with its own separate tax return. That is more complicated, and it matters because you need to tell your CPA when it happens. Ryan told a story about a client who brought in a partner and did not mention it until after the filing deadline had passed. Nobody reaches out, and your CPA is not a mind reader.

Should you elect S corp status because someone on TikTok said so?

This is where Ryan got the most direct. Owners often come in saying they saw a social media video, or a friend told them to become an S corp to save taxes. Ryan explained the idea in simple terms: in an S corporation, you pay yourself a wage that is subject to payroll taxes, and the remaining business earnings are not treated as self-employment earnings. On a large profit, that difference could be significant.

But the IRS knows the game. That is why the 'reasonable compensation' idea exists: you cannot pay yourself a dollar and call everything else profit. Ryan's point was that the number is not clearly defined, and if the IRS challenges it, the cost can be back taxes and penalties. He called that out as a real risk for a one-person operation where the owner does all the work. Ask your CPA what level of pay would be defensible in your situation.

Ryan said he really wants to see leverage before he pushes an owner toward an S corp for tax reasons: a sales team, a builder group, back office staff creating value so the owner is not the only one doing the work. Then he listed the downsides he says nobody mentions:

• Less flexibility on who gets what. A partnership can allocate profits unevenly to reflect work or contribution. In an S corporation, distributions have to follow ownership percentages.
• Moving assets out of the company. In his example, giving a depreciated work truck to your son from a partnership can be simple. From an S corporation, the IRS can treat it as if you sold it.
• Unwinding is messy. Ryan described a client with two S corporations who needed to move an item from one to the other and ended up having to value it and report income, because they jumped in early.

His advice: generally start with an LLC, build the business, and have the S corp conversation when you have leverage and extra capacity, understanding it is not purely about tax savings. Do not jump the gun. If someone told you to do something and you cannot say why, ask why.

What taxes catch new business owners off guard?

Ryan said the other big one is everything outside income tax: sales tax, local business taxes in some cities, licensing, contractor fees, permits and insurance. He told a story about someone who started cutting trees, worked in a city, and did not know he should have registered with it. Each little thing adds up. Find out what your area requires before you start.

There is also a real difference between an employee and a business owner. As an employee, someone else sends in your taxes. As an owner, nobody sends them in for you. Ryan described the classic mistake: it feels great to pull in a big number, pay a few bills, pocket the rest and spend it, then find out at tax time that you owe a lot. He offered a rough rule of thumb of setting aside somewhere around 25 to 35 percent of what comes in, in a separate account. That is his general guidance, not a rule for your situation, so ask your CPA what is right for you.

He also explained that tax agencies generally expect you to pay as you go through the year, not once at filing time, and that waiting can mean penalties and interest. Ask your CPA what schedule applies to you. Ryan mentioned a local restaurant that he understood closed after being unprepared for a tax bill. It is a good reminder that taxes are a cash planning issue.

What is Profit First and why does it matter for builders?

Ryan recommended the book Profit First by Mike Michalowicz. The idea is that you pay yourself first. Know what you need to live on each month. Set aside profit, set aside money for taxes, set aside your regular draw, and use what is left to run the business. Then use that same math to decide when you have the capacity for a bigger commitment like an office or storefront.

Why is once a year not a CPA relationship?

Ryan used a doctor analogy. If you only see your doctor once a year for fifteen minutes, he gets a snapshot. When something is wrong, you call. Tax season for a CPA is about sixty days of nonstop work. If that is the only time he hears from you, he cannot give you much more than a review of what already happened. They do not know you want more unless you tell them.

The relationships Ryan values most involve regular touch points, such as a quarterly meeting for thirty minutes to an hour, where they look at the balance sheet and profit and loss statement in the accounting software, compare this year to last, and ask why a line is up or down. In one example, a quick review revealed a large annual spend on credit card fees that the owner had never noticed, because they were not in the numbers. It will cost something. Ryan was open that this is paid time, and that the fee should be explainable. But it replaces surprises with planning.

And here is the line I keep coming back to: just because there is cash in the bank does not mean you are doing well. Cash can come from the timing of who paid you this month. You may actually be losing money and have no idea.

Should tax savings drive your business decisions?

No, and Ryan gave two examples. First, a couple who received a large one-time payment started thinking about launching a business just to create deductions. He asked what they actually wanted. They liked a certain vacation spot and wanted to retire there someday, so they went a different direction entirely. He said it was one of the most useful thirty-minute conversations because the plan came from their goals, not from a deduction.

Second, the truck. Owners love the idea of a big vehicle purchase because of a deduction. Ryan's math, which I loved: if you spend $100,000 to save $30,000, you are $70,000 in the hole. Did you need the truck? Ask whether the spend moves the business forward. If you truly need a vehicle, call your CPA first and ask about timing and the right model before you walk into the dealership. He shared a story about a real estate agent whose quick call before buying saved real money on the deal.

What are the red flags that it is time to find a new CPA?

Ryan was practical here. Look for a new one if:

• They will not return a call or text, or never acknowledge it. Even a quick 'I'll get back to you tomorrow' counts.
• You do not understand why your entity is set up the way it is, and they cannot or will not explain it.
• They push back on meeting more often as unnecessary.
• You feel uneasy, for example when a refund status shows nothing was filed and you cannot get an answer.
• You feel more stress after talking to them, not less.

He also said to give them a chance first. Reach out, tell them you would like more from the relationship, and put a meeting on the calendar. If they are not the right fit, it may take trial and error to find the right one. Local can be great, and sometimes you do not need local at all. You should walk away feeling confident in the next step and the reason for it.

Three things to do this month

1. Ask your CPA to explain why your business is set up the way it is, and whether it still fits.
2. Put a quarterly check-in on the calendar and bring your financials. Ask what the numbers are telling you.
3. Get your books in order. Run income and expenses through one business account and keep simple records, or hire an affordable bookkeeper, so that you know whether you are making money before tax season.

Seek to understand why. If you cannot explain a decision in two or three points to a friend, it probably should not be your decision yet.