According to the SBA (Small Business Administration), most businesses will fail within the first to second year of operation, simply because of several factors that surround the business plan and its execution.
Most individuals and groups who long to be successful business owners may not have what it takes to become entrepreneurs. Having a great idea to create a new product or service doesn’t substitute for having the business acumen to implement it by planning correctly.
It’s more likely to fail because the entrepreneur did not install the right team to operate and navigate the business successfully.
Every business owner should have three very vital members on their team. These members are a business attorney, business consultant, and an accountant.
An accountant who handles accounting and tax preparation is ideal for a healthy business because all the financials are in one office. Your accountant needs to know the tax implications of your business decisions. Knowing this in advance allows the accountant to be more proactive rather than reactive at the end of the fiscal year.
Successful businessmen and businesswomen say, “You can’t be unaware of your numbers and at the same time do not have a tax strategy.” That is a direct path for a failing plan for business and indeed for life goals according to experienced entrepreneurs.
Planning, forecasting, and strate- gizing are critical fundamentals of any business being successful. A company having the right plan with an excellent tax strategy will undoubtedly lead to success while forecasting correctly. Strategic tax planning allows every business owner to maximize their deductions and limit their liabilities effectively.
When I am asked, “do I file taxes?” I often chuckle and respond, “No, I do not.” However, I do limit liabilities and use tax strategies as a way of building wealth. Building wealth through tax is a great way to minimize your liability and grow your retirement accounts for you and your children.
Let’s talk about some strategies for building your wealth through taxation.
If you employ a family member – The IRS offers many options with the potential benefits of sheltering income from taxes by hiring your children as employees. Hiring family members is a great way to reduce taxes for micro-businesses and keep the company in the family. There are even certain circumstances where micro-business owners can eliminate the tax on income paid to their children. The IRS does allow micro-business owners to reduce taxes by hiring spouses as well. They are also not subject to the Federal Unemployment Tax Act.
As a business owner, you’ll give up employer-matched 401k plans. However, other retirement account options can maximize your retirement savings. You can reap valuable benefits by having your business pay into your retirement. In the one-participant 401k plan, the IRS allows putting away up to $57,000 in total retirement contributions. Some of the retirement vehicles include SEP (Simplified Pension Plan, IRA or Roth IRA, and 403B plans).
Small business owners and micro-business owners can save a lot of money through home office deductions. Usually, micro-businesses are home-based. So, it’s a very realistic way to save money. If you meet the IRS requirements and keep a record of your dealings, you’ll be all set. Make sure that you fulfill these requirements:
You should use your home regularly, which means that you should work 4 out of 7 days a week there, or most of the time, performing your business functions. It’s best to have a specific room set up, particularly for business activities. It would be best if you also had an internet connection which you use specifically for work. Complete all these steps, and the IRS will probably consider your company as a micro-business operating out of a home.
Make sure that you use the home exclusively for business-related activities. If you are having parties or hosting guests regularly in your home office, it will not qualify as an entire home office.
Ensure your accountant or tax professional checks all avenues to put you and your business in the best possible position to maximize wealth building through tax.
Established in 2006, Robert McFadden formed McFadden Accounting to focus on solopreneurs and micro-businesses underserved by larger firms directly. The company is known for its ability to provide “all hands on deck” services, resources, and tax strategies to clients looking to build wealth and limit their business liabilities. McFadden Accounting ([email protected]) is a collaborating partner with She Serves She Matters.