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TogglePaying taxes is an essential part and a liability of a business, thus, taking care of it is very important. For small businesses, it can prove to be a nightmare if they do not take care of in advance, as capital is the main aspect for these businesses to grow. Thus tax planning becomes necessary to reduce the tax liabilities through various methods.
For this, there are two major points that one need to take care of. They are as follows:
As a small business owner, you must have the basic understanding and awareness of the taxes applicable in your business and industry so you can take the financial decision and can plan your business strategy effectively.
The owner should also know and keep himself updated about the constant changes in taxation rules and policies that impact his business. They can easily do it by monitoring official government portals or various industry websites.
A small business can also save up or can reduce the tax obligations by taking a few steps and adopting various taxation methods as stated below.
A small business must prepare an accountable plan in advance to showcase its assets and liabilities in the balance sheet to eliminate any of the Government disputes in future and to save on the taxes at the same time.
To reduce the tax liabilities, this method is useful in which you can show your deferred income in the financial statement of next year instead of the current year, or else you can also show maximum deduction in your current year’s statement related to various expenses incurred for business. This will lower the amount of taxable revenue and will reduce tax liabilities.
How the business is structured impacts the tax liabilities, thus, this is a very crucial part. As a business owner, you can decide on how you want your small business to be like. For i.e. paying a certain percentage of revenue to charity can end up reducing tax liabilities. So plan your business structure well and in advance.
The retirement plan is an important instrument where you can park a certain amount of your revenue from a small business over there. The government approves few retirement instruments where a certain limit for investment is given, which ends up in reducing the tax liabilities for the business.
When you increase the salaries of your employees, you have to pay various taxes on that. Along with you, the employees also have to pay additional taxes after a hike in salary. So the best way is to contribute to your employees’ benefits like health benefits. That will eventually reduce your tax liabilities along with that of your employees.
So let’s identify what are the methods of tax reduction for small businesses:
By structuring the tax planning in advance, a small business can gain numerous benefits and can save. To know more about various methods of tax reduction for small businesses contact Meru Accounting today!