Tax Planning Strategies for Business Owners

One of the hidden costs of running a business is taxes. Taxes are necessary, but unless you have utilized effective tax planning, there’s every chance that you are overpaying your taxes. The amount of money that you could potentially save by developing a tax plan is significant, and could potentially protect your business in the long run. 

There are some simple strategies that you can employ yourself, which can have a significant effect. Most importantly, you should be sure to set aside money for regular tax payments and that you know exactly when they are due. Well-structured payments and paying on time are simple to employ, but take a lot of stress out of paying taxes.

Hiring a tax consultant for businesses is one of the best options if you simply don’t have the time for working out your tax plan. The initial cost of outside business tax services will likely be heavily outweighed by the potential savings gained through extensive tax planning. As well as that, consider the time that you or your employees will have saved, time that is far better used to further grow your business. 

Certain accounting firms may help your business to become more productive and profitable by providing certain CFO services. They will analyze your business and use that information to create a targeted tax plan. Any business, large or small, can benefit from this by improving cash flow as well as saving money.

Some of the more common and effective tax planning strategies that business tax services might provide include:

Research and Development Tax Credit

This tax credit is an incentive that is typically associated with scientific research or tech companies, but it may apply to a wider range of businesses. If your business contributes to innovation for the public good somehow, such as by developing new processes or products, then it may be eligible for this tax credit. 

Obviously, this might not be the case for every company, but it’s certainly worth looking into.

Legal Entity Optimization

Larger companies especially may suffer from unwieldy and redundant legal entity structures, especially if there has been a lot of merger and acquisition activity. These structures typically cause more issues than not, including tax-related issues. 

Not only can simplifying and optimizing these legal entity structures improve the tax situation, but it can also save a great deal of money in other sectors and will allow for more streamlined and efficient processes.

Section 1202: Potential Tax Break

Section 1202 of the tax code can potentially save you thousands in taxes if you take advantage of it. Through the Section 1202 process, you may be eligible for a federal tax break on capital gains from certain small business stocks. These stocks include shares of an active C-corporation located in the US that meets IRS criteria. 

This is just one example of the tax code which can be hugely beneficial for eligible businesses, and a tax consultant for businesses will be aware of others that you can include in your tax plan. 

This article is for informational purposes only and not intended to be legal or official tax advice. We always recommend discussing with your attorney or tax professional to determine how this information affects your specific situation.

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