How to Run a Tax-Efficient Business
Taxes can be tricky, and businesses have the ability to take tax complexity and kick it up several notches. Especially if you are unfamiliar with how business taxes work, you might find yourself suffering from some sticker shock come tax time. Fortunately, there are some things you can do as a business owner to reduce what you owe on taxes and make your business more tax-efficient.
Have Professionals Do Your Taxes
Perhaps the simplest way to deal with taxes, hiring a professional to do your business taxes for you can save a lot of time, effort, and probably a few headaches. It can also help you save the most on your taxes. Tax professionals have literally made it their job to know the ins and outs of tax laws. They’re the experts. Tax professionals who specialize in business taxes know how different business structures impact taxes and what to do to save you the most money.
Structure It Properly
When you choose a business structure, one of the things you might want to take into account is the tax implications that go along with it. Depending on the structure you choose, you may be able to save on taxes. For example, an LLC structure helps you avoid double taxation, which corporations have to do. Corporations are required to pay taxes as a business, as are the owners. LLCs don’t pay taxes. Instead the owner reports the profits and loss on their personal return. If you decide that this sounds like the direction you want to go in, be sure to research what it takes to get started. Setting up an LLC requires you to take a few steps before you can register it with the state.
Take Advantage of Tax Deductions
As you handle the day-to-day events of running a business, keep in mind that some of those things may qualify as tax write-offs. These write-offs are deductible from your taxable income, reducing the amount of income that can be taxed. To take advantage of these opportunities, be sure to keep careful records and receipts. It will be important to be able to prove that these deductions are genuine, especially if you end up being audited. Make sure you understand the rules regarding what does and doesn’t count as something that can be written off. For example, you may be able to write off taking a client to a business lunch, but if you go to a show after you probably won’t be able to write off the entertainment.
There are lots of things businesses can do to reduce their tax liability. Taking advantage of tax deductions, making sure their business is structured optimally, and hiring a business tax professional are a few options you can pursue in an effort to be as tax-efficient as possible. Take a look at your business to see which of them are right for you.
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