Sheltering his business: James Wiley uses tax strategies to build wealth

Black Enterprise, June, 2005 by Nicole Lewis

AFTER NEARLY 10 YEARS, JAMES WILEY walked away from corporate America. Now he's on the path to entrepreneurship. Taking $22,000 from his IRA, the 34-year-old CPA opened J.E. Wiley CPA & Associates in June 2004. His Atlanta-based company has 45 clients, including high-net-worth individuals and local businesses. Wiley is growing the business through referrals, networking, and forming joint ventures with other CPA firms.

In February, he partnered with two larger, well-established CPAs to form another company called VAAS Professionals L.L.C., which specializes in audit assignments. By partnering with other firms, Wiley says he'll have a better chance of winning larger contracts. "We can do more than tax returns and bookkeeping," he explains. "We can audit companies, and that can add to my revenue streams." Wiley estimates $100,000 in total revenues by the end of 2005. Add to that another $10,000 generated through his work as an adjunct professor of accounting principles at four local colleges.

By establishing his own company, Wiley is committed to Declaration of Financial Empowerment principle No. 8: to support the creation and growth of profitable, competitive black-owned enterprises. As with any newfound entity, the road to success is paved with obstacles. In Wiley's case he has a mountain of debt--$60,000 in student loans and $15,000 in credit card balances. He's depending on his CPA skills as well as prudent money managing strategies to help wiggle his way out of debt.

By adhering to DOFE principle No. 4: to engage in sound budget, credit, and tax management practices, Wiley says he'll work his way into a financially sound position. "Owning my own business has given me a very good tax advantage," Wiley says. "This year, it's safe to say that I'll save more than $7,000 because I'm claiming expenses involved in starting up and maintaining my company." That includes the purchase of computers, laptops, fax machines, and printers, in addition to other business expenses.

As far as credit is concerned, Wiley had a credit score of 700 when he established his firm, which meant he could borrow at a lower interest rate. He currently has an American Express card and a Visa card, both of which have an 8% interest rate. Wiley notes that he checks his credit history twice a year and follows up on any mistakes on his report. He has no intention of applying for any more credit, nor has he initiated any inquiries, all of which can bring one's credit score down.

Wiley's situation is similar to that of many professionals who pay a high price for higher education. He received his B.A. in accounting from Oral Roberts University in Tulsa, Oklahoma. By the time he earned his M.B.A. from Clark Atlanta University in 1995, he had amassed $75,000 in student loans. Wiley had hoped to knock down his debts quickly once he entered the workforce. But working for the financial controller at a government contracting firm in Maryland and later in the accounting office of Service Merchandise in Tennessee didn't prove financially rewarding. "At both jobs I earned a $40,000 salary. But with the expense of paying rent, a car note, and basic living costs, I delayed saving," he says.

In 1999, Wiley took a job in client accounting at GE Capital in Atlanta, and by 2003 he was earning $75,000, including his professorship. When the company asked him to relocate to Alabama, Wiley leaped at the chance. Unfortunately, he was unfit filled and unchallenged in his new position, and seven months later he quit his job and moved back to Atlanta. For the first six months of 2004, he actively sought consulting work while also serving as a part-time instructor at Shorter College in Atlanta. Grossing about $32,000 during that period, Wiley felt that a better wealth-building strategy would be to establish a company and claim expenses as a tax shelter.

When running your own business, itemizing expenses is crucial. Using an Excel spreadsheet, Wiley examines his finances and adjusts his budget weekly. "My expenses per month range from $3,000 to $3,500. It's important for me to know this and to be constantly up-to-date with any changes that might occur," he explains. "I budget what my expected income is going to be and anticipate expenses, so it gives me a guideline."

PRINCIPLE 8

To support the creation and growth of profitable, competitive black-owned enterprises

Based on his experience as a CPA and entrepreneur, Wiley shares three pieces of advice with those seeking to start their own business and develop financial management skills:

* Stick a strict budget and write down your expenses. You need a budget to have a sense of the financial direction your business is heading. Wiley says you should keep in mind that "losses can work to your advantage. It's good to outline your expenses and take losses sometimes because you can use some of those losses to offset your personal income."

* Take advantage of peers and people in your inner circle. Don't be afraid to use strategic alliances or well-established business relationships to help grow your company. Wiley says partnering allows you to approach clients that you might not otherwise be able to pursue on your own.