Paying taxes is the least desirable payment we want to make. Over one’s lifetime, one of the largest – if not THE largest – outlays in income will be on paying taxes. If the goal is to pay the lowest amount in taxes possible, then tax planning – particularly tax planning in advance – is vital.
What does “tax planning” really mean? It is the art of structuring your business and using beneficial tax law provisions in the tax code to postpone, decrease, or avoid paying taxes altogether. Federal income tax rules are not becoming any simpler, which is why thoughtful tax planning by a knowledgeable tax adviser is paramount to the success of your business.
There are several different ways of organizing a business: C Corporation, Partnership, S Corporation, Sole Proprietorship, LLC… the list goes on. Do you know the difference? And more importantly, do you have the right structure for your long-term needs, and the structure that will save you the most in taxes? The IRS’ rules for the many different types of entities are quite different from structure to structure, and having the most efficient one for your specific business type can result in huge tax savings. A concrete example is a client who had organized her start-up business as a Limited Liability Company aka: LLC, not knowing if she was going to be successful, not having any idea of how much money she was going to make, and certainly not knowing the ins and outs of the tax code. At the end of the first year, I told her she would have saved $8000 in taxes if she had been an S Corporation. Voilà! S Corporation created, most efficient corporate structure in place, and least amount of taxes paid. Success!
This is just one example of why having a tax professional who is well versed in the intricacies of the tax code is crucial to: (1) deferring taxes for as long as possible is a key component; (2) having a knowledgeable adviser as your business grows and strategies evolve (and most certainly as the tax code changes increasing its complexity!); and (3) designing an exit strategy when you are ready to retire, or merging your company with another company.
Contact US to schedule your initial consultation.