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Taxes are one of the biggest outgoings for most small businesses which can be a problem when you’re trying to get started on a relatively limited budget. Cash flow is going to be your biggest challenge and while you can cut costs across the business there are still outgoings that can’t be avoided, tax being one of them.
But even though you can’t avoid it completely, there are ways that you can reduce your tax bill by quite a significant amount.
Know The Law
Before we get into the specifics of lowering your tax bill, it’s important to emphasize just how important it is that you know tax laws inside out. They’re prone to changing a lot and if you aren’t up to date with new regulations you could end up paying more than you need to. It can also lead to mistakes on your tax returns which you might get charged a fine for.
To avoid this, you need to learn all of the laws and read up on them regularly so you’re aware of any changes ahead of time. You can take cpe seminars online which range from the basic up to the more advanced levels of tax law. It’s a good idea to do this at the beginning so you don’t get tripped up along the way.
Hire Your Children
Most people don’t know that it’s legal for a person to hire family members from the age of 7 upwards. That doesn’t mean you’ll have them running around the office, but it does offer you a sneaky way of reducing your business taxes. If you pay a salary to your children, that money is tax exempt. However, that doesn’t mean you can just pay all of your money to a child and avoid tax on it. The money paid has to be going toward something specific, usually a savings account for college etc. That way you can save for their future and save yourself some money on tax at the same time.
Any business expenses that you claim are exempt from tax as well so you need to make sure that you’re putting every last thing down. Any travel that you do for work can be claimed as expenses, as can anything else you’ve spent money on that has been used for the running of the business. That includes things like laptops or phones, as long as you’ve them for work. Once you add all of those small costs together, you’d be surprised just how much tax you could be saving.
Save For Retirement
It’s always sensible to start saving for retirement early but when you’re running a new business, you’re likely to be putting all of that cash back into the company. However, any money that you save in a retirement fund is tax exempt. Even if it’s just a little bit, putting money into a retirement savings account every month is a smart financial move with the added benefit of reducing your tax bill.
High tax bills can kill a small business if it isn’t bringing in enough revenue but with these simple tricks, you can make sure that doesn’t happen to you.