How you structure your company and where your business is based for tax purposes could make a huge difference to the amount of taxes you have to pay each year.
A good starting point would be to make sure you choose a legal setup that is the most tax-efficient for your situation and the way you intend to take the business forward. It makes sense to someone who handles company formation so that you can get guidance on your best options.
Setting up your business using the most appropriate legal entity is one way to legally lower your taxes. There are other schemes and incentives that could also reduce your tax burden within the parameters of the law.
Here are some tax-saving tips to consider.
Keep it in the family
If you are running a small business it makes a lot of sense to hire a family member. Especially when the IRS offers you a number of different options that could lower your taxes when you put a family member on the payroll.
Small business owners are eligible to pay a lower marginal rate of tax if they hire a family member. You might even be able to eliminate the tax that would have been due on income paid to your children.
You will have to follow the rules to be able to claim this tax benefit legitimately. Speak to a professional advisor about the advantages of employing a family member to help reduce your taxes.
Plan for the future
If you start working for yourself rather than an employer you will lose the chance to get your 401 (k) contributions matched by the company you work for. However, running your business does create some other retirement benefit options that you can take advantage of.
The IRS has a number of retirement plan options available. If you find the right one that fits your self-employed status you should be able to make contributions paid for by the business that lower your taxes as well as allow you to save for the future.
Good incentives for meeting your healthcare needs
Putting money aside for healthcare needs is recognized as one of the best ways to lower your business taxes. It is a no-brainer when you consider that you will be making valuable provisions for your future healthcare needs whilst being allowed to legally escape taxes by making pre-tax contributions.
Create the right business structure
As previously highlighted in the introduction, it is always a wise idea to get advice on how best to structure your business so that you are as tax-efficient as possible.
Whether you register as a limited liability company (LLC) or as a sole proprietor, for instance, could have a noticeable impact on the tax-deductible expenses you can claim and the amount of tax you have to pay in total.
The time and money you might spend on getting professional tax advice could make all the difference to how much tax you pay. Nobody wants to pay more tax than they have to, so it makes sense to see if you can find legitimate ways to give the IRS less of your money.