When it comes to launching a new small business, the list of startup costs and related expenses can seem like it never ends. It could even discourage you from moving forward with your business plan. There is some good news, though, in terms of how you can hang on to more of the money you make as a business owner. Bert Seither, who specializes in assisting small business owners in a variety of industries, suggests the following tips on how to reduce your business tax liability:
1. Consider adopting a more formal business structure.
If you work as a sole proprietor or have a business partner who is part of a partnership with you, the IRS is likely taxing you at the highest income tax rates going. Thankfully, there are options to cut down on what you owe in taxes. Consider taking on a more formal structure for your business, which could lead to more flexibility, protection, and lower tax rates. Some options include adopting an LLC designation or becoming a corporation. Be sure to explore each option to see which one could offer the best tax savings, Bert Seither says.
2. Look at all possible business tax deductions.
If you compare personal tax deductions to business tax deductions, you’ll be stunned at how different the two are. The IRS actually allows business owners to deduct a wide range of expenses that are directly tied to their ability to conduct business. With this in mind, it is an absolute must to fully explore all possible business tax deductions that could reduce the amount of taxes you pay on the income that your company generates. The home office deduction, the vehicle deduction, meals and entertainment, and other business expense deductions are just some of the many tax-saving opportunities out there for those in charge of business enterprises. In the end, you just might be amazed at what you can write off and how much more money will be in your business bank account at the end of the year.
3. Look at business tax credits.
Tax credits are not quite as common as tax deductions in the business space, but they are certainly worth checking into, Bert Seither says. Business owners who hire veterans or disabled workers, use energy-efficient items, or conduct specific types of trade may be eligible for tax credits that are extremely beneficial to reducing how much a company is on the hook for tax-wise. Some of these credits can be claimed just once or multiple times, so make an effort to do some research to find out if you can reduce your taxes through claiming them.
4. Consider using an accounting professional.
Even though a large percentage of business owners wear a bunch of hats, one hat they probably aren’t too fond of wearing is handling the accounting aspects of a business. Because of this, outsourcing your tax filings, bookkeeping, or payroll may save you both time and money. Accounting pros who are experienced in preparing business taxes know the tricks of the trade to assist their clients in limiting what they owe the IRS. Since these methods are completely legitimate, it makes perfect sense to have a knowledgeable accountant handle your business tax returns for you. The cost of getting this valuable assistance is well worth it.