Owning a small business comes with its own set of trials and tribulations, and, of course, expenses! Saving wherever possible is a big deal to a small business owner, as every bit counts towards the longevity and success of said venture. The early stages of a business is where the groundwork needs to be laid in a legal sense to prevent any bumps along the way, and there are quite a few little known legal loopholes that small business owners can benefit from when it comes to saving money.
For starters, what kind of business do you own? It may be a silly question, but you should pay careful consideration to the legal entity under which you list your business as it may make the world of difference when it comes to paying taxes. While all businesses are subject to taxes, it is not equal across the board. Keep this in mind when having your business listed as a corporation, LLC (Limited Liability Company), a partnership or a sole proprietorship.
Once a business is listed properly, then it becomes clearer which tax bracket the business falls into. As a corporation, a business can be listed as a 'C' Corporation or an 'S' Corporation. Again, this makes a huge difference when it comes to saving money. An 'S' Corporation is able to save up to thousands more in taxes simply because of the way the arrangement for said businesses is set out. Subsequently, it's a good idea for owners of partnership or sole proprietorship businesses to consider forming a corporation instead.
Receiving actual wages instead of taking profits from the business is also a big way that owners of small businesses can save money. This is because of the deduction on payroll taxes once an employee of the business is receiving Fair Market Value salary. Otherwise called FMV, this is what is considered a reasonable amount of wages for services rendered as an employee.
Any excess profit then becomes a dividend to be paid out that is not actually subject to any payroll tax. This is another advantage of having 'S' Corporation status. Other business types would be subject to at least 15% taxes on business profits, regardless of any Fair Market Value wages that may be in place.
As an 'S' Corporation business, you will be able to get tax deductions on losses. However, if you have a 'C' Corporation, you may have to carry those losses forward into the first year that the company experiences any profit. This could become an issue as owning a small business is quite a struggle and many have to close before ever seeing a profit.
Hiring one's kids as employees of a small business is another way to save what could be a significant sum in taxes. Once children are old enough to be employable and have the skills required for their role in the business, they are exempt from certain taxes. Therefore, by keeping the business family-oriented, a small business owner can save hundreds or even thousands of dollars per annum.
A final loophole to help you save money in your business is to plan vacations as part of business trips. This is easy to do by simply extending the length of the trip by a few days so that you can relax after taking care of business. This way, you do not have to pay additional expenses for travel and you can deduct travel expenses as a business expense.
For starters, what kind of business do you own? It may be a silly question, but you should pay careful consideration to the legal entity under which you list your business as it may make the world of difference when it comes to paying taxes. While all businesses are subject to taxes, it is not equal across the board. Keep this in mind when having your business listed as a corporation, LLC (Limited Liability Company), a partnership or a sole proprietorship.
Once a business is listed properly, then it becomes clearer which tax bracket the business falls into. As a corporation, a business can be listed as a 'C' Corporation or an 'S' Corporation. Again, this makes a huge difference when it comes to saving money. An 'S' Corporation is able to save up to thousands more in taxes simply because of the way the arrangement for said businesses is set out. Subsequently, it's a good idea for owners of partnership or sole proprietorship businesses to consider forming a corporation instead.
Receiving actual wages instead of taking profits from the business is also a big way that owners of small businesses can save money. This is because of the deduction on payroll taxes once an employee of the business is receiving Fair Market Value salary. Otherwise called FMV, this is what is considered a reasonable amount of wages for services rendered as an employee.
Any excess profit then becomes a dividend to be paid out that is not actually subject to any payroll tax. This is another advantage of having 'S' Corporation status. Other business types would be subject to at least 15% taxes on business profits, regardless of any Fair Market Value wages that may be in place.
As an 'S' Corporation business, you will be able to get tax deductions on losses. However, if you have a 'C' Corporation, you may have to carry those losses forward into the first year that the company experiences any profit. This could become an issue as owning a small business is quite a struggle and many have to close before ever seeing a profit.
Hiring one's kids as employees of a small business is another way to save what could be a significant sum in taxes. Once children are old enough to be employable and have the skills required for their role in the business, they are exempt from certain taxes. Therefore, by keeping the business family-oriented, a small business owner can save hundreds or even thousands of dollars per annum.
A final loophole to help you save money in your business is to plan vacations as part of business trips. This is easy to do by simply extending the length of the trip by a few days so that you can relax after taking care of business. This way, you do not have to pay additional expenses for travel and you can deduct travel expenses as a business expense.
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