Stop Donating $15K to the IRS: Smart Tax Moves for Fractional Executives

You worked hard for that revenue. Here's how to actually keep it.

Let's cut to the chase: If you're a fractional executive making six figures and you haven't set up your business structure correctly, you're probably donating somewhere between $10,000 and $18,000 to the government every single year.

Not because you have to. Because you haven't made the right moves.

Ron Harpaz has spent years working with solos - consultants, coaches, fractional executives - and he sees the same pattern repeatedly: brilliant professionals who crush it for their clients but leave serious money on the table because they never got their back office right.

Here's what he wants you to know.

The LLC Misconception That's Costing You

First things first: Getting an LLC does not save you money on taxes. Period.

"An LLC is a legal entity," Ron explains. "You should have one - you're running a business, it should be registered. But that has no impact on your tax liability whatsoever."

The LLC gives you legal protection. If something goes sideways with a client, they can come after your business assets, not your personal ones. That's important. But from a tax perspective? Your LLC is just a "pass-through entity." Nothing changes. You don't save a dime.

The magic happens with the S Corp election.

The S Corp: Where the Real Savings Live

When you elect S Corp tax treatment for your LLC, you're telling the IRS that you want to separate what you pay yourself as a salary from what the business generates as profit.

Here's why that matters: Your salary gets hit with self-employment tax. Your profit distributions? They don't.

Ron puts it plainly: "This is not a trick. This is intentional. The IRS designed it this way to promote people running businesses in a professional manner."

The numbers are real. Many fractional executives save $15,000 or more annually just by making this structural change. No fancy accounting wizardry. No aggressive deductions. Just running your business the way the IRS actually wants you to.

The catch? You have to run it well. That means proper payroll, clean books, and treating your business like an actual business - not a side hustle you manage on a spreadsheet.

Stop Chasing Deductions (Seriously)

Here's where Ron gets a little spicy about the advice you'll find on TikTok and YouTube.

"Historically, you'd have everybody telling you to go spend in all kinds of ways because you can deduct it for taxes - all the way from an extra meal up to an expensive truck," he says. "The mistake is that's a way to save money by spending money."

Think about it: You spend $10,000 on something "deductible," you save maybe $2,000-3,000 in taxes. You're still out $7,000 you didn't need to spend.

Instead, Ron recommends focusing on tax strategies that don't require additional spending:

Business use of your vehicle: If you're driving to client sites, you can deduct the mileage. Track it properly and it adds up.

Business use of your home: That dedicated home office - where you actually conduct business - is deductible. A portion of your rent or mortgage, utilities, and related expenses can be written off.

Retirement accounts (done right): Most solos know about SEP IRAs. But as an S Corp, you can open a Solo 401(k) with both employer and employee contributions, unlocking significantly higher contribution limits.

"There are tax strategies that are right for almost every single thing you want to do," Ron emphasizes. "Just make sure you get your information from sources that have some skin in the game."

The Dedicated Bank Account Rule (Don't Skip This)

Before you start optimizing anything, Ron has one non-negotiable: Get a dedicated business bank account.

"A lot of people start their business and commingle funds between business and personal," he warns. "That's a big no-no. If the IRS comes knocking, that's the biggest way to get your books disqualified and get into trouble."

All income in. All expenses out. One dedicated account. No mixing personal purchases with business transactions. This isn't optional - it's foundational.

The CEO Mindset Shift

Here's where the conversation gets bigger than just taxes.

Ron has observed that the most successful fractional executives share one trait: they think like CEOs, not freelancers.

"You're running a business. Sure, it's a company of one - you chose that. But you should still be strategic about what you spend your precious time and mind space on."

The successful ones focus on excellence in client service, business development, and growing their network. They build relationships with other solos to deliver more comprehensive work for clients.

What they don't do? Spend weekends reconciling books and reading IRS publications.

"In order to be strategic and think about your business that way, you need confidence that the back office is managed," Ron explains. "What I see a lot of folks trip on is the day-to-day running of their business takes so much attention that they get dragged down to minutia instead of strategy."

His advice is refreshingly direct: "If you don't hire us, hire somebody else. Get something or someone to take off your plate all of that stuff so you can be the CEO of your business."

The Bottom Line

You didn't become a fractional executive so you could become an expert in tax code. You did it to deliver your expertise to clients and build a business on your own terms.

But ignoring the back office isn't an option either. The difference between fractional executives who build sustainable, profitable businesses and those who burn out is often this: the first group got help with the stuff that doesn't require their genius.

Set up your S Corp correctly. Get a dedicated bank account. Stop chasing deductions and start using structural tax strategies. And find someone - whether it's Lettuce or another solution - to handle the back office so you can focus on what you actually do best.

The future of work is independent. The infrastructure to support that future exists. The only question is whether you'll use it.

Mylance

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