Every day business owners have to make quick decisions to keep the business moving forward.
A tax plan should not fall into this category. Of course it can, and for many business owners it does, but making tax decisions on-the-go, or only when it’s time to file taxes, might help keep the company on a forward path, but it doesn’t help it to grow.
Companies that are following a growth curve are doing so because of purposeful, well-timed, long-term decisions. Developing a tax strategy falls into that category.
It takes experienced financial understanding to develop year end tax planning for businesses and it takes discipline to follow it through. But the reward is a stronger bottom line, more manageable tax processes for your company, and an upward growth trajectory.
Proactive Business Tax Planning vs Tax Preparation
Tax planning and tax preparation are sometimes used interchangeably but in reality they are two very different roles, each requiring a specific skill set and focus.
Tax preparation is generally handled by a CPA or similarly skilled professional. Their goal is to help you get all of your tax documents together in advance of the filing deadline of April 15th.
A tax planner starts their work after April 15th. That’s because it is their responsibility to work with you to develop a tax strategy that will see you taking advantage of tax-derived benefits all year long.
Another way to look at it is that tax preparation is about looking back while tax planning is concerned with looking ahead.
Tax Planning for Business Owners
In order to build robust business tax strategies you’ll need to make some decisions early in the planning process.
Preparing For Business Milestones
Business years are rarely, if ever, static. Income can fluctuate, changes to business lines can occur (i.e. launching a new product line or shutting down an existing one), expansion can happen, and contraction can occur. Things like:
- The timing of transactions
- When you report income
- How to align cash flow
Understanding how these milestone changes affect not only the state of the business today but the long-term growth-potential of the company is important for tax planning purposes.
The “Industry Effect” on Tax Considerations
When it comes to performing year end tax planning for businesses it will be important for your tax planner to not just focus on the “general” IRS regulations regarding taxes. They will need to get granular on the tax details of your specific industry. That’s because, while there are some regulations that cover all tax filers, there are some industry-specific tax standards as well. They will need to consider things like:
- How inventory at your car dealership could become a tax liability.
- When to sell crypto because the timing has tax implications.
- If payroll tax growth rates at your franchise can be slowed.
Incorporation Strategies
Your business may be structured as an LLC, partnership, S Corps, or other entity. The decision you make not only affects the governance of the company, it gives you another tax planning tool to build into your strategy. For example, with an S Corps you could potentially reduce the amount of self-employment taxes you pay by dividing your income between W-2 payments and distributions.
Start Growing With Business Tax Planning
A good tax strategy doesn’t just point out areas of financial growth, it also highlights where things could be a concern. We have worked with companies in a range of industries to negate those concerns while creating tax strategies that lead to business growth. And we’d like to do the same for you.
During our introductory conversation we’ll ask you about your current tax plans, your growth aspirations, and other basic financial services questions. We’ll use this detail to develop an initial plan that will help ensure you are on the path to financial success.
Schedule a free consultation today.