The Value of Tax Planning for a New Business

Over 600,000 new businesses are formed each and every year. Whether financed with personal funds, bank loans, or even borrowing from family and friends, starting a business is no easy feat. The success of new businesses varies significantly with fluctuations in the economy, but there are certain inevitabilities that remain. From raising money to developing a marketing plan, from product development to tax planning, and every aspect in between, making sound decisions from the outset is critical to having a shot at building a successful company.

Tax planning strategies for forming a new business means assessing a number of tax options to figure out when and how to conduct business as well as personal transactions in order to minimize tax liability. Since a typical entrepreneur is juggling a million different pieces of the business, tax planning is often low on the priority list or even ignored altogether. In fact, many small business owners neglect to consider anything tax-related until the end of the year when they reach out to their accountants to file.

While tax planning is imperative for businesses in all phases of their lifecycle, companies in their infancy stage can particularly benefit from prudent, tactical tax strategy. Waiting until the end of the year to think about taxes causes all kinds of headaches for an already busy entrepreneur. As such, the best defense against stressful end-of-year taxes is a strong tax offense at the company’s inception.

Your New Business and a Strategic Tax Plan

The day-to-day tasks of an entrepreneur range significantly. In fact, most entrepreneurs wear so many different hats that their schedules vary drastically from one day to the next. With such a busy agenda, it is easy to neglect something like tax planning. However, those business owners who make tax planning a priority will reap the benefits at the end of the year and every year thereafter.

As with any plan, the best place to start is in determining the goals of said plan. Tax planning is no different. Most business owners begin formulating their tax plan with the following objectives in mind:

  • Keeping taxable income down
  • Making sure to claim available tax credits
  • Reducing their tax rate
  • Dictating the timing of paying taxes
  • Managing the impact of the Alternative Minimum Tax
  • Doing their best to dodge the most common tax planning errors

In order to achieve these goals, the business owner will need to estimate what tax bracket they will be in. In doing so, the business will be able to save tax dollars dependent upon the income level that it falls into. While making these estimations seems difficult, the reality is that new businesses must come up with things like projected income, projected cash flow, and projected sales revenue anyway. So, creating the tax plan with this in mind is certainly achievable. Plus, with guidance from a tax planning expert, entrepreneurs will be positioned to succeed in their first year.

At Ellrich, Neal, Smith & Stohlman, P.A., our tax services include the preparation of federal and state income tax returns for all business, not-for-profit organizations, and personal entities including individuals, estates, trusts, partnerships and corporations as well as business and individual tax planning and consulting.

However, our tax planning service goes far beyond filing a tax return. We assist new businesses with basic ownership options and tax consequences and guide growing businesses through year-end planning and projections. We offer a broad range of consulting services that include evaluating material transactions, mergers and acquisitions, international taxation strategies, and estate and trust planning. For more information, please contact our Palm Beach Gardens or Miami offices today!