The 3 Most Important Tax Planning Tips for Family Owned Businesses
A month ago I went to the doctor and learned that the reason of why I am feeling the way I do is because of my lifestyle. My doctor told me that by just removing certain foods from my diet and doing 15 minutes of intense cardio, I would feel better. How many times have we heard that before? MANY! Well this time I decided I would do whatever it takes to feel better and guess what? Go figure, my doctor was right. I feel tons better. Trust me, it wasn’t an easy transition. I had to plan my meals, choosing the right ingredients so I would not get sick, keeping a record of the meals I ate and how I felt afterwards and finally I had to remove the excuses that stopped me from making the time to exercise. Yet after doing the above for a few weeks, it became easy, it became a routine. As I was going through all the steps above it made me realize that I could help businesses heal too just by avoiding these expensive tax mistakes:
- Failure to plan. One of the most costly business mistakes a business owner can do is fail to plan. So often we get wrapped up in what we are doing for our business before we know it January 1st is here and we are now trying to locate all of our tax documents to file our return on time. We know that our tax bill will be the same as it was last year and the year before that. Why? Because we always let the year go by without spending much time on planning. If I could tell you that you could save 5%, 10% or 15% on your tax bill if you just spent the time to plan, would you? Are you in enough pain to make that change?
- Choosing the Wrong Business Entity. Most businesses start out as sole proprietors and unfortunately stay that way for some time. When I ask clients why they haven’t thought of incorporating I am told “my business isn’t that big” or “I don’t think it is financially feasible to incorporate because of how costly it is to do so”. By choosing the right entity for your business, not only do you help protect yourself from business liability, there are many tax advantages too.
- Good record keeping. I can’t tell you how many times I get the new business owner who brings their proverbial shoe box to the tax appointment and puts it on my desk, very proud of themselves that they have so many receipts because surely they aren’t missing any. And it never fails that I get the deer in the headlights look when I begin asking questions and the answers cannot be found in the shoebox. Right there, that missed receipt or record is a missed deduction. Every missed tax deduction is an increase in tax owed. Just by having a good record keeping system, can save you hundreds on taxes.
And I think the most important one of them all: NO MORE EXCUSES! Yes, you can find the time to plan. Yes, it is financially feasible to choose the right business entity. And yes, you can make the time to keep good records. And if you can’t find the time, hire someone who can. A healthy business is a “fit” business.