Every small business owner has a tax liability that is owed to the government based on income generated. There are so many laws with regards to exemptions, deductions, and credits making it more than a challenge for small business owners to handle. Yes, we would all agree that taxes can create stress and stress can most definitely create unwanted problems. To alleviate the stress of taxes, the team here at Tax Alternatives wants our clients to understand that year end is not the only time of year to focus on your small business taxes. With that said, our team wants to share some tips on how you can reduce your taxes and your stress year-round.
Let’s Take Away the Stress
1. One of the most important aspects of your small business is that of your business structure. There are a few different business structures you can choose from including:
- Sole proprietorship – A sole proprietorship has only one owner. This one owner treats all profits as their own personal income and is liable, on a personal level, for all debts incurred by the business.
- Partnership – A partnership is structured similarly to that of a sole proprietorship except it can have a number of owners not just one.
- C corporation – A C corporation is owned by a number of shareholders. All profits from this business structure are paid out as dividends to the shareholders. The business debts are not the liability of the shareholders.
- S corporation – A S corporation is structured in the same way as a C corporation, however there is a cap on the number of shareholders you can have. The shareholders are capped out at 100.
Each of these business structures plays a role in how much a small business must pay in taxes. The main types of tax categories include income tax, employment tax, self-employment tax and excise tax. Choosing the right business structure for you is critical to your ongoing tax situation.
2. The next important component is that of net earnings. A business’s net earnings are all the business income minus all the business overhead and expenses. The net earnings of a small business determine the amount of income taxes paid. Depending upon the business structure, the amount of taxes paid will vary. This is where the professionals here at Tax Alternatives come in. Our team of experts is on hand to help calculate net earnings and identify legal deductions and help make all the right tax decisions.
3. Retirement contributions – Certainly retirement plans you offer your employees, benefit the employees. However, they can also benefit your small business. Employer contributions that are made to employee retirement plans are a tax-deductible item and include an employer tax credit upon setup. Again, this is where our team of experts comes in. We can help with all your important decision making when it comes time to choose a retirement plan that is best suited to you, your business and your employees.
4. Hiring a member of the family – A common way to reduce your small business taxes is to employ a family member. There are a number of perks to hiring a family member, and surely our team can help you understand the options. Whether you want to hire a spouse, child or sibling, we are here to guide you.
There You Have It
As is the case with any tax issue or scenario, it is always best to consult with a tax specialist. Our team of highly skilled and experienced tax specialists here at Tax Alternatives is up to date on all the newest tax regulations and laws and the vast number of deductions that are allowed. Our team is steadfast in our commitment to meet the individual needs of all our valued clients and wants to be sure that you do not wait until year’s end to focus on your taxes.
For more information on how you can reduce your small business taxes, or to schedule a free consultation, reach out to one of our staff today. We look forward to serving you and to helping you minimize your tax obligation and watch your business grow!