Tax Planning When Starting A New Business

Tax planning for a business is crucial. The very fact that how taxation related issues have been dealt with in your business plans can create a huge difference between success and failure of your business. While you are working hard on preparing business plans and projections, you just cannot afford to ignore tax related matters. If you are not careful in your planning, you may end up paying a fortune of money in the form of taxes, which can actually leave a serious dent on the overall income or profit of your business. Following is a brief rundown on some of the tips and suggestions that you may find very useful, especially if you are starting a new business.

Choose The Most Suitable Structure For Your Business

You are strongly recommended to do a thorough brainstorming about the best structure of your business while you are planning to start a new business. Tax planning for a business is also crucial when it comes to finalizing on a specific structure. It is very important for you to understand that the US taxation rules vary significantly depending upon which business structure you are using – whether it is C-Corps, S-Corps, LLCs, partnership firms, or sole proprietorships. The best structure for you is the one that does not only meet your business requirements, but also something that gives you room to save more on taxes.

Ownership Vs Lease

You can save a substantial amount of money on property taxes, sales taxes, and other taxes if you choose to go for leasing instead of buying various properties. Whether you buy or lease properties, such as vehicles, equipment, and real estate, you pay almost the same amount of money in either case. That is the reason why many people prefer to have ownerships on such properties rather than getting them on lease. But, such decisions are often based on impulses, not on facts. Ownership can cause you to pay a much larger sum of money towards various types of taxes related to those properties. Therefore, while you are doing tax planning for a business, you must seriously consider about this aspect and make an informed decision whether leasing can be a good idea in your specific situation. Obviously, there are several other factors also that you may like to take into account in this regard.

Capital Gains Tax

When you sell real estate properties, bonds and stocks, you may be held liable to pay capital gain taxes provided you are not selling them at loss. It is however important to note that capital gain taxes do not automatically apply to you just because your business is holding a particular property. You become liable to pay this form of tax only when a capital asset is sold off because it is then when government can actually get an accurate assessment of the actual value of such properties. Therefore, you must do regular monitoring of how the value of those properties is appreciating during the period you are holding it. You must also wait for the right time to sell the same; the right time is the one when the properties gross the highest amount. While you are working on your strategies to do tax planning for a business, you must also keep an eye on how the laws change over time. For example, if the capital gains taxes are expected to be increased at a specific date, it will be wise to sell the properties before that date. This way, you can manage to achieve a much higher net profit even if you are selling it at a comparatively lower price than otherwise. Similarly, if you are considering buying a property, you should again wait for the right time.

Overall, it is crucial to do a thorough tax planning for a business. The success and failure of your business depends very much on how you have dealt with the taxation related issues while preparing your business plans