One of the most common mistakes that small businesses make usually revolves around tax, and more importantly, tax planning. The concept might sound scary, and many shy away from that sort of planning in fear of what tax issues may loom ahead.
Unfortunately, burying your hand in the sand when it coms to tax planning is very much a short-term solution that will only yield headaches. Business owners often let taxes slip by the wayside until it comes time to meet with their accountant. Unfortunately, the problem with that strategy is that accountants cannot help you formulate a tax strategy that will benefit you if you come to them too late.
A good accountant is in the best position to help you craft a strategy that enables your business to make a significant dent on their tax liabilities. This does not refer to any nefarious dealings, of course, or any Al Capone like illegal tax evasions. It simply means putting into a practice a legal and smart method of tax planning that will impact your business positively.
What exactly is tax planning?
Luckily, it's a somewhat simple concept to get behind. Tax planning refers to the process for a business to conduct both its business and personal transactions in a way that reduces tax liability - in some cases, it might eliminate it altogether.
The process requires examining various tax options in order to determine when, whether, and how to conduct business and personal transactions to reduce or eliminate tax liability.
The process seems initially daunting because it requires a lot of evaluation, and a keen understanding of what the long-term and short-term goals are for the business. You and your accountant must build a solid foundation of communication in order to convey these ideas and make sure that whatever option you pick is the best strategic move for your business.
In fact, the best move is to go back to the basics when beginning the process of tax planning. The first step is ascertaining what form of organization your business will take, and what tax options align well with that.
Once that is established, it then becomes time to look at each individual piece of your business and how that will change your overall tax planning strategy. This will require looking at aspects of the organization such as retirement plan options, and other benefits that your organization offers and how that will factor in.
It is important to construct a tax planing strategy that will drive success but still retain enough incentives and benefits to keep employees happy. Striking that balance may seem difficult at first, but you can work with your accountant to come up with a financial plan that will help your business steadily grow
When should I start planning for my business taxes?
It may seem too early to think about tax planning right now, but the truth is, there is no time quite like the present to begin pursuing that avenue for your business. Rather than coming to your accountant late in the game, start a tax planning strategy early on and get ahead.
Understanding how revenue and taxes can be better utilized is essential for any business, no matter the size, to remain profitable over the long run. Moreover, it is essential to have key players on your team, both within the business and outside of it who can step in and assist in the process.
Contact us today to learn more about how the right tax planning strategy can benefit your business today.