6 Tax Savings Tips For Business Owners
Hi Friends, today we’ll look at 6 reasons small business owners and creatives pay more taxes than they need to and I’ll offer a few simple solutions.
Hi, my name is Lucas and welcome! As a creative, the subject of taxes is pretty low on my to-do list but as a business owner, I realized that I could be saving up to 30% on taxes each year… and that caught my attention.
Did you know that 99% of the tax law teaches us how to pay less taxes? It’s full of incentives that are available to anyone But most of us never take advantage of these incentives - WHY? (If you prefer to watch the video, please check it out here…)
#1, 2 3: Fear, Avoidance and a Lack of Understanding
Three major reasons stop 99% of my clients before they ever get started. Fear, Avoidance and a lack of Understanding. We fear and avoid things we don’t understand but with a tiny sprinkling of knowledge, things can quickly improve.
For example, The fact that the government offers tax incentives to business owners is helpful to shift our perspective. Now,
“taxes are not something to fear and avoid, they’re an opportunity to save money.”
I’m not suggesting you read the tax code but Believe it or not, there are people out there who actually LOVE that kind of thing. In the US we call them Certified Public Accountants. The good ones understand the tax code & LOVE to help small business owners like you and I, pay less taxes.
By having a tax professional there to guide you, fear and avoidance of your taxes will be a thing of the past. Plus, tax laws are complex and change frequently, so having someone in your corner is is worth every penny.
And if you’re thinking, “yeah but, they’re expensive” ARE THEY? We don’t think twice about giving a waitress 20% - but are they saving us money? A good tax pro will save you more over the course of your life than any other person on this planet. And most of them are only 2-5%.
#4: No Legal Structure
If you do not have a legal business entity set up, the government takes their cut first and leaves you with the leftovers But with a proper entity and plan, the money flows differently.
Let’s say you make $100k. As an employee, you pay taxes on $100k. That’s it, you have no other options.
But with a proper business, $100k comes in and rather than pay taxes right away, you pay for business expenses first and then you pay taxes on whatever’s left
And that’s BEFORE implementing ALL of the other tax incentives and credits that are available to business owners.
Now, The type of entity you set up, (sole proprietorship, partnership, LLC, S Corporation, C Corporation) can significantly impact how much tax you save so it’s worth speaking to a tax professional that’s familiar with your local laws. Check Out Mark J. Kohler if you’d like to learn more.
#5: Not Separating Your Business and Personal Finances
Another reason people pay more than they need to is because they mix their business and personal finances. The solution? Separate and simplify.
I recommend 1 credit card and checking account for your business and 1 credit card and checking account for personal. Once you have the business and personal accounts dialed, close all of your other cards and accounts.
You’ll have a clean set of transactions, it’ll be easier to stay in-tune with your spending and you’ll never co-mingle funds. PLUS, it’ll be much easier to maximize your deductions and depreciation. I walk you through the process in this video.
And if you’re are afraid to look at your finances because they’re such a mess, click here to hop on a call with me. I’ll look at your income, expenses and debts with you, for free.
#6: Not Paying Taxes On Time
Last but not least, the most common reason people pay more taxes than they need to is waiting until the end of the year to pay them. I was guilty of this for many years.
I was not setting aside money on a quarterly or monthly basis and would get hit with a HUGE tax bill and have to pay a ton of late fees and penalties. But there’s a simple solution.
Every time you get paid, send a percentage to a bank account that’s specifically set up for your taxes. You may be shocked to see how quickly it grows. Personally, I transfer 25% to my tax account every time I receive money and because that’s more than I need, I have a surplus in the account for emergencies.
If you like to learn how to set this up, check out this video.
And there you have it..
Six common reasons most business owners and aspiring business owners are paying more taxes than they need to.
Plug just one of these financial leaks and you’ll see more money in your bank account. Plug all 6, and I think you will be amazed at how much money you can keep!
Thank you so much for your time and energy and thank you for choosing to show up for you!
- Lucas Z.