7 Tax Tips to Leverage for Your Small Business

By Gaurav Sharma

Small enterprise homeowners have so many obligations. From sourcing enterprise provides to managing buyer relationships, there’s lots they should do to maintain their enterprises working. 

Amidst all of the obligations, tax obligations usually get pushed to the again burner as entrepreneurs cope with extra ‘critical’ points. 

This usually results in missed alternatives to scale back the tax burden and will additionally imply dealing with expensive fines once you don’t adhere to the set tax rules. 

By taking cost of your tax planning, you may scale back your tax invoice, save more cash, and assure the long-term monetary well being of your enterprise. Under, we share the highest tax suggestions each small business owner ought to know to make tax season much less nerve-racking. 

1. Efficient Bookkeeping

12 months-round, efficient recording conserving is obligatory if you wish to have a straightforward time throughout tax season. It should additionally assist you maximize your deductions because you’ll have clear data of the bills you may deduct when calculating your tax invoice. 

That is why it is essential to put in a robust bookkeeping system that types and organizes all of your tax data. With the numerous recording-keeping software program accessible to you, you not must depend on handbook methods of bookkeeping which can be error-prone. 

When selecting a conserving system, decide an all-in-one resolution that automates essential bookkeeping features reminiscent of:

  • Monitoring enterprise bills
  • Monitoring enterprise revenue and gross sales
  • Managing stock
  • Creating invoices

Such a system will guarantee all of your tax data is up-to-date for simple submitting and maximization of deductions. It should additionally assist you keep away from the massive penalties that include incomplete or incorrect tax returns. 

2. Separate Your Enterprise and Private Affairs

From the day you launch your enterprise, make an effort to maintain your enterprise and private affairs separate. Separating these two elements of your life makes it simpler to say deductions when submitting taxes and supporting your claims throughout an audit. 

A number of the measures you may take to maintain your enterprise and private affairs separate embody:

  • Opening a separate financial institution account for the business. Don’t use the identical checking account for your enterprise and private affairs as this makes it troublesome to trace enterprise bills and revenue for taxation functions. 
  • Do not mix private and enterprise bills as this might deliver confusion when figuring out enterprise bills for a given interval. For instance, when working a bakery get separate receipts to your residence and enterprise provides. 
  • Pay your self a set wage from your enterprise account. This makes it straightforward to calculate how your private and enterprise revenue might be taxed. 

3. Incorporate Your Enterprise

If your enterprise is registered as a sole proprietorship, then you need to take into account incorporating it to scale back your tax legal responsibility. 

Enterprise homeowners who work with a small enterprise formulation company reminiscent of Inc Authority to register their entities both as an LLC or Company can take away the employer possibility of their FICA taxes to lower their tax legal responsibility. You possibly can assessment this company’s companies intimately on this complete GovDocFiling’s Inc Authority review put up.

Moreover, companies registered as C Corps can have their first $50,000 taxed at a decrease fee, additional reducing their tax burden. 

4. Make use of Your Children

In case your kids are of age, then you may make use of them within the enterprise to scale back your tax invoice. 

Youngsters have a decrease tax fee and using them will assist you save on taxes. Discover appropriate roles the youngsters can carry out within the enterprise and pay them an affordable wage. 

The wages paid to kids are taxed at a decrease fee (usually zero), thereby decreasing your tax legal responsibility. This technique additionally applies to different low-tax fee people beneath your care reminiscent of retired mother and father. 

Fairly than gifting them cash, make use of them within the enterprise and add them to your payroll. 

5. Make Contributions to a Retirement Plan

Saving for retirement is likely one of the wisest issues you are able to do as a small enterprise proprietor. Not solely will the funds guarantee you could have one thing to maintain your self throughout previous age, however it might probably additionally assist you pay much less taxes. 

Small enterprise homeowners can contribute as much as $57,000 per 12 months to a retirement plan and these contributions are tax-free. 

6. Rent a CPA 

Most small enterprise homeowners usually are not satisfied that hiring an expert to deal with their tax reporting is the suitable factor to do. They imagine that they’ll do the taxes themselves and save on the skilled charges. 

What most do not realize is that tax professionals know the way that will help you maximize your tax advantages. These professionals know the tax deductions you are entitled to and can information you to say them successfully. 

Additionally they assist you make the suitable long-term plans to make sure your enterprise stays tax-compliant whereas decreasing your tax invoice. 

For somebody busy with different enterprise commitments, permitting a CPA to deal with your taxes is a smart transfer that can unlock many advantages for your enterprise. 

7. Contract Workers

Lastly, take into account working with unbiased contractors moderately than hiring workers on a everlasting foundation. With this technique, you’re assured of high quality work with out the burden of extra taxes. 

It is because you’re not required to pay worker taxes for unbiased contractors, thereby decreasing your tax invoice. 


Small companies have many tax obligations and it’s solely with correct planning that you’ll meet these obligations and enhance your monetary place. 

The tax suggestions we now have shared on this article are supposed to be your roadmap to success. Implementing them will assist you decrease your tax liabilities and enhance your monetary standing in the long term.