Tax planning for the small business owner involves negotiating a maze of local, state and federal regulations. Smart owners conduct feasibility studies first before making any other kind of investment. Failure to do so could result in substantial losses.
Some businesses have failed completely because of excessive taxes. In most cases, the companies failed to create a payment schedule. The company directors failed to estimate the amount of taxes that would be owed. When tax-time came, they lacked sufficient funds to pay the taxes owed. Their only alternative was to declare bankruptcy.
A thorough feasibility study could have prevented the company's failure. The directors would have been able to reduce the amount of taxes owed, which is perfectly legal.
A tax planning analyst would have advised the directors to pay the company's taxes on a quarterly basis. Reducing costs in other areas, such as salaries, might have been necessary to ensure funds were sufficient to pay the quarterly taxes. An analyst might also have suggested where cuts could be made in order to protect against future losses.
If you are a small business owner or you plan to become one in the near future, you have many things to think about. You are the entrepreneur.
You could be involved in every aspect of running the company. You might need to find suppliers, hire employees and select a location. One of the first things you should do is prioritize, that is, select the things that you alone must do and delegate the rest.
Unless you happen to be trained in tax planning and analysis, this is one of the things that should be delegated. The laws concerning taxes are complicated and they change on a frequent basis.
An analyst could find that running your company in the location you selected is unfeasible. That's rare, but it does happen. If you have yet to commit to a lease, you can easily move your small business to a more tax-friendly location.
Federal, state and county credits are available for businesses opening up in specific locations. You might even qualify for a grant. Right now, a small business located in specific areas of the US qualify for federal grants and tax credits for installing renewable sources of energy, such as solar power.