Everybody knows Santa this time of year but have you ever stopped to think of him as a business owner? In the spirit of the season here are my thoughts:
1. The North Pole workshop is a separate entity from the business of delivering toys and is in its own LLC. This entity receives rent income from the manufacturing of toys. It pays property tax, utilities, insurance and takes depreciation on the building. For the first time in history the addition he added this year for the new assembly line is eligible for section 179 treatment.
2. The toy manufacturing company is most likely an S Corp, so that Mr. & Mrs. Claus can pay themselves a wage and avoid self employment tax on the net income of the company. Every year Santa struggles with a reasonable wage to pay himself and has determined that paying himself 10% in wages and 90% in dividends is too risky. He feels better with a 40/60 split and his accountant prefers a 60/40 split.
3. Now some people are sure that he takes standard mileage on his sleigh. But I believe firmly that the sleigh is 100% business use and therefore he takes the actual expenses. After all a sleigh cannot be used for personal use, I have yet to see one parked outside the local market while he runs in for a few groceries and with the miles he puts on it in one night of deliveries he probably needs a new one every year and we all know that a one of a kind vehicle such as a sleigh cannot be cheap, so taking the actual cost of the sleigh and the fuel it burns in one evening is larger than taking the standard mileage rate even if he does travel hundred’s of thousands of miles.
4. Uniforms and work clothes are provided to Santa and the elves and these are a 100% business deduction because red suits with fur trim are not suitable for ordinary street wear nor are the little green suits with the pointy shoes the elves wear.
5. Santa is a generous employer and not only has health insurance for each of his elf employees he also has a 401(k) plan for them. He makes sure to maximize his deferral every year with his eye on retiring to a beach one day.
6. One of the nice things about his toy manufacturing business and the time of year that he delivers the toys is he never has to take an inventory count at year end. The toys are all delivered and the shelves are empty letting him take 100% of the cost of making the toys as an expense.
7. During the month of December when it gets really crazy in the toy factory, Santa provides meals on the premises for the convenience of all his elves. These meals are 100% deductible because they are on his premises and for the convenience of more than 50% of the elves.
8. Now a third business I am sure he has is a farm. The business of raising and caring for the reindeer is separate from a toy manufacturing business and a commercial rental and is therefore it’s own entity. The farm rents the reindeer to Santa for income to cover the costs of maintaining a herd of reindeer.
Those are my top 8 thoughts on the Business of Santa, I hope you have enjoyed them. Merry Christmas to all!