There are several things small business owners can do to minimize their tax burden:
Choose the right business structure: Different business structures have different tax implications. For example, sole proprietorships and partnerships are taxed as pass-through entities, which means that the company itself does not pay tax on its income. Instead, business owners pay taxes on their share of business income based on their tax returns. Corporations, on the other hand, are taxed as separate entities and may be subject to double taxation.
Take advantage of tax credits and credits: Small businesses are eligible for a variety of tax credits and credits, such as the home office deduction, the small business health tax credit, and the research and development tax credit.
Keep good records: Small business owners need to document deductions and credits and support information on tax returns.
Estimated Tax Plan: If a small business owner expects to owe at least $1,000 in taxes during the year, they may have to pay estimated taxes during the year.
Consider a Retirement Plan: Creating a retirement plan such as a SEP IRA or Solo
01(k) can provide tax benefits and help a business owner save for retirement.
Get professional help: Consider hiring a tax professional, such as an accountant or tax attorney, to help with tax planning and ensure the business takes advantage of all available tax benefits.