Starting your own business could mean a lot of responsibilities for a person. The number of duties that you will need to perform can be overwhelming at first, and other obligations that can be outside of your expertise or knowledge. And one of them is your business taxes.
No matter how much you try to learn about taxation, you will find many things that will sound strange to you, especially if you are starting your small business. That’s why we have gathered the tops eight tips when you are dealing with low business taxes.
Hire the right accountant :
If you think that an accountant is someone who prepares the business’ financial statements and does the taxes, you have to forget about that. When we talk about the right accountant doing small business accounting, it must be a professional who will be working with you throughout the year. An accountant must track your account receivables and account payables, and he or she must secure that your business’ cash flow is strictly monitored when it comes to gross and net profits. As a business owner, you have to work with your accountant as soon as you started operating your business, and not only during the tax seasons. As a small business, you have to know the importance of accounting for the benefit and growth of your business.
Keep sufficient records :
Remember that being as an owner, it is your responsibility to keep your business records – it may be a little amount of sale or an expense. Secure accurate and thorough files for the entire year if you want to have a correct tax return. If you failed to do it, there is a considerable chance that you are compromising and making it a subject for an audit. One of the best recommendations for a small business is investing in simple accounting software since it is inexpensive, user-friendly, and it will be a big help in tracking your income and expenses.
Separate personal expenses from your business expenses :
This is one of the basic rules in doing the business – make sure that you don’t mix up your expenses from your business expenses. Prevent the troubles that can be caused by “commingled money.” Get your business a separate bank account and credit card and use them for your business cash flow.
Understand the difference in gross income and net income :
One of the reasons why you need to do your research before you start building your own business is because a lot of business owners don’t understand the difference between gross income and net income. If you want your business to become profitable and see it growing, you have to know what your total revenue and net income are. Avoid the situation where your production costs are higher than its market price because if this happens, no matter how many products you sell, you will still end up losing your business’ money.
Classify your business correctly :
You have to correctly classify your business if you want to avoid overpaying your taxes. Your business classification, such as Single Member LLC, S Corporation, C Corporation, Sole Proprietor, Limited Liability Company, or Limited Liability Partnership, will affect the amount of taxes that you will pay. The best way to classify your small business is by consulting an accountant or attorney because they have a better knowledge of business classifications.
Carefully manage your business payroll :
Most businesses will choose to hire a third-party company to do the payroll works. As a small business, there is a big chance that you opt for an unpopular payroll business, and that’s fine. All you have to do is make sure that you are working with a reputable and reliable company. Payroll taxes are an essential part of your business, and it can bring big trouble if your payroll service provider fails to remit them. Make sure that you confirm the payment of your payroll taxes every quarter.
Ask your accountant’s thoughts about business plans :
If you can find the right accountant, he or she can be a big help in growing your business. Your accountant can share his or her advice when it comes to various decisions, such as the contribution of your retirement fund, should you have a bonus for this year or not, or is it an excellent investment to buy a small space for your business.
Maximize the advantage of capitalization rules :
A significant deduction from your taxes is possible if you purchase equipment or tangible piece of property for your business, use QuoteGrab to compare prices on goods or services. Be sure that your accountant knows and understands the capitalization rules to take advantage of it.
Taxes might feel like a liability for your business, especially if you are starting with a small one. But if you manage to understand and follow those tips we have mentioned above, you will be surprised by how it can contribute to the growth of your business.
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