| College and college-bound families should be looking | | | | In that way, the small business will have its own |
| into a unique opportunity to save tens of thousands | | | | individual tax status. However, I recommend that a |
| of dollars on college costs for school year 2007-2008. | | | | tax advisor be consulted before choosing any |
| For the very first time, there’s a loophole in the | | | | particular corporate entity. |
| 2007-2008 Free Application for Federal Student Aid, | | | | 529 Plan owners can benefit as well |
| (FAFSA). As a result, families who own and control a | | | | In the financial aid formulas, students have no asset |
| small business and who are only required to complete | | | | protection allowance, which means that for every |
| the FAFSA, have a rare opportunity to capitalize on a | | | | dollar a student has, they lose 20 cents per year in |
| financial aid bonanza! | | | | financial aid. Parents fare far better and only lose |
| I direct your attention to a provision in the Higher | | | | 5.6% per year over their allowance which increases |
| Education Reconciliation Act of 2005 (S. 9132), which | | | | with age. Now that both 529 Pre-paid Tuition and 529 |
| was approved by the Senate on Dec. 31, 2005, by | | | | Savings Plans are considered parent assets. I |
| the House on Feb. 2, 2006, and signed into law by | | | | recommend the following: |
| President Bush on Feb. 8, 2006, that states, “The | | | | For 529 Plan owners, it’s a bit more complex. |
| net value of small businesses with not more than 100 | | | | Those parents who own one can legally transfer the |
| full-time equivalent employees is excluded from the | | | | entire account value into a similar plan owned by their |
| definition of assets.” | | | | small business entity, but need to be aware of the |
| Accordingly, small business owners (parents, not | | | | downside. The transfer could trigger a taxable event, |
| students), or those who can legally set up a small | | | | but only on the gains in the 529 Savings Plan. Once |
| business under the federal guidelines, will reap huge | | | | the transfer has taken place, if the beneficiary is |
| rewards in the form of untold thousands in financial | | | | ever changed, it could also result in a taxable event. |
| aid previously unobtainable! | | | | Nonetheless, the strategy makes perfectly good |
| It is highly advisable to set up a C or S Corporation, | | | | sense, as the benefits far outweigh any modest |
| LLC, or at the very least, obtain an Employer | | | | income tax consequences. Go for it! |
| Identification Number (EIN) for a Schedule C business. | | | | |