Reduce Your Business Taxes
Time to get your corporation or LLC started NOW!
Many of us have been waiting with bated breath through this whole election cycle. And many of us, no matter who we voted for, are a bit nervous about what may change in the coming months. With the economy wreaking havoc on our bank accounts, businesses, and emotions, we look to a new President with the hopes that things will begin to move once again. Just having the elections over is a good start, a time to get back to business.
A great way to prepare for the change we will be seeing is to have options regarding the tax management of your business. The key to tax management is to open as many of those options as you possibly can, so that in the face of any change, you can adapt and take maximum advantage of the changes through structured planning.
Because businesses have tax write-offs either unavailable to individuals or with better percentages than are available to individuals, it’s smart to keep your business income separated from your personal income. And because wealthier individuals will be taxed even more, and because the definition of “wealthy individual” is changing, it’s more important now to keep the two incomes separate. A sole proprietorship keeps your business profits taxed at the personal level on your 1040 tax return and keeps you from taking advantage of the full 100% write-offs available to formal businesses. Instead, by using a business entity, such as a corporation or limited liability company, you can take advantage of those tax write-offs that are not available to an individual’s tax return.
You can actually have more than one tax return: your individual tax return, or 1040, and your business’s tax return. By separating the incomes, you add options, giving yourself more control in the game of reducing taxes. You will have the power to design a great tax strategy, with the help of a good accountant.
Leaving your business structured as a sole proprietorship leaves you with only one choice: pay taxes both personally and at the business level on the same tax return. Your personal write-offs will potentially be eaten up by business profits, and your business dollars cannot be used as effectively as they could be through some other type of business entity.
While tax management is only one of the many great reasons to incorporate, it’s the reason that is on most of our minds at the beginning of these challenging times. Don’t wait to set up your entity any longer. Don’t let your neighbors or the media or anyone else tell you that your business is too small to incorporate. Other people may not see the folly of remaining a sole proprietor; don’t hurt your business by following the people who don’t get it.
Tags: Business Taxes, Corporate Taxes, Tax Management, Tax Savings, Taxes
