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Tax planning for small business begins with determining
that the business is operating using the appropriate business
entity. Periodic re-evaluation is also necessary
to ensure that the business has not changed to such an
extent that the current structure is no longer advantageous.
The types of entities that a business may select include:
- Sole proprietorship
- Partnership (general or limited)
- LLC (taxed as a disregarded entity, corporation, or
s corporation)
- Corporation
- S Corporation
In addition, business planning much like planning strategies
for individuals requires deliberate planning of income
and expenses. For example, a cash basis taxpayer
may want to accelerate deductions into the current year
if the coming year’s income is not expected to be
as great. If next year’s income is expected
to be higher, it may be better to defer payment of expenses
(cash basis taxpayer) or delay receipt of property/services
(accrual basis taxpayer).
In addition to attracting and retaining staff, retirement
accounts (401(k), SIMPLE, SEP, etc.) can be used to save
taxes and allow funds to grow tax deferred. Also,
consider Roth IRA investments as a long-term strategy (these
contributions are not currently deductible, but distributions
after age 59 ½ are not taxable).
Learn more about Wegner LLP's Tax Services
Additional resources for business tax planning can be
found at:
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