A successful business owner once shared a three-part philosophy
for operating a business: first, steer clear of tax problems; second,
reduce your tax burden; and third, concentrate on making the best
living in your chosen business.
No one has to pay more tax than the law requires. There are
legitimate ways to minimize your tax liability and limit the time
you invest in complying with various tax laws. Undoubtedly, you will need help.
Business owners cannot afford to keep accountants and attorneys standing by, ready to
give on-point tax advice. Most business owners first rely on their knowledge garnered
from past business experience. When they get in over their head, they call in an advisor to
assist them with special planning and problem solving.
Business owners often feel pressured to stay current on countless business issues,
including leadership and management, labor relations, motivational coaching, finance,
taxation, safe hiring practices, and - the list can go on and on. It is virtually impossible to
keep up on all concerns a business will face.
Tax law is forever changing. Knowing how to use the law to your advantage takes
careful study and forethought. Of late, business owners have been hit by a flurry of tax
law changes that keep most guessing. Operating your business successfully, while still
achieving the lowest possible taxes, can be a challenge.
Initial start-up businesses may not need the services of a professional tax advisor. The
complexity of issues facing these businesses can be minor, like cash vs. accrual or setting
up a couple of assets to depreciate. Advice from a person who does taxes on the side may
be adequate. As the business grows and is successful, most business owners find it a
necessity to engage a CPA or other tax advisor.
There are many different types of professional tax advisors– CPAs, bookkeeping
services, enrolled agents, and commercial franchise or licensed services. There is not one
sure answer for all businesses. If you are confident of your business dealings and have
good, internal books, then someone who can simply fill out the proper forms will meet
your needs.
But if your business is growing, you need an advisor who challenges, consults, and
makes suggestions on the best way to write off assets, informs you of issues that may
arise if the IRS audits you, and help you determine what your business can do to legally
pay the least amount of tax.
Proper planning can save you money. Look ahead to the choices you can make to lower
your taxes, and in turn, lower your cost of doing business.
Taxpayers should be proactive. There may be tax savings opportunities you can
implement. A professional tax advisor can help you decide how best to legally lower
your tax burden. But, how do you choose a tax advisor?
As a perspective customer of professional tax services, you need to be aware that hiring
your tax professional based solely on hourly rates and standard charges only assures you
get the cheapest tax professional. But cost has no bearing on quality, knowledge or the
likelihood you will receive useful tax ideas. If you want to get good tax services, engage
your advisor and discuss ways to improve profit and reduce taxes in your business.
Your professional tax advisor can review with you the options that can be used in your
business to minimize your taxes. This might include maximizing retirement plans aimed
specifically at the owners, best business formation for the lowest taxation, dividing your
business interest into more than one business organization, the best form of business
organization, special tax rules that apply to your industry, enhancing your liability
protection, maximizing your benefits of ownership, or areas your business is at risk in
case of a tax audit.
Business tax planning is complex and depends on your specific circumstances. Each type
of business has different methods for reporting and recognizing income and expenses.
Some businesses use cash basis accounting while others use accrual. Businesses can be
structured as corporations where the business pays the taxes, or as a partnership, Scorporation
or limited liability company (LLC), known as “pass-through” entities, where
the net result of the income is passed through to the owners.
The key to your success is to have an advisor who understands your goals and helps you
apply the rules or laws to benefit your business and lower your taxes.
