“In this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin
Your small business needs to correctly file and pay taxes – on time
That hopefully isn’t news to you. But many small business owners put off thinking about taxes until the last possible moment.
Planning ahead not only means you’ll avoid a last-minute scramble to get all your documentation completed – it also means you’ll have the opportunity to minimize your tax liability.
So, as a small business owner, what should you do to make sure you’re fully on top of your taxes?
#1: Set Up Your Business in the Right Way
Different business structures have different taxation requirements. It’s important to choose whichever is going to be most appropriate for your business. That might mean setting up as a sole proprietorship, a partnership, an LLC, or a corporation.
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It’s well worth seeking advice (or at least doing some in-depth research) before you set your business up, to ensure you’re not going to end up paying far more tax than you should.
#2: Don’t Just “Leave it to the Professionals”
While you hopefully have an accountant and/or bookkeeper, it’s important not to simply leave everything to them. You should have a clear understanding of how your accounting processes work, too – and you should track what’s coming into your accounts and what’s going out.
If you’re not confident about handling accounts and figures, try this small business accounting cheat sheet to get to grips with what you need to know.
#3: Always Get a Receipt
Many business expenses are tax deductible – which means you want to ensure you’re including all the expenses you’ve incurred. Always get a receipt, particularly when you’re paid cash.
It’s also worth making sure you know what’s tax deductible, so you don’t end up paying more tax than you need to. There’s a handy list here of expenses that are fully tax deductible.
#4: Track Due Dates on Your Calendar
It’s crucial that you’re on top of important tax deadlines – you definitely don’t want to realize, in the middle of an incredibly hectic week, that you’ve only got a few days to get all your paperwork together to file your quarterly taxes.
Get in the habit of not only putting key deadlines on your calendar, but also of adding a reminder three or four weeks in advance, to give you time to prepare.
#5: Keep Track of Your Charitable Giving
If you donate to charity, you can normally deduct that donation from your taxable income. This doesn’t just apply to monetary donations – you may also be able to reduce your tax bill by accounting for “in kind” donation of goods/services.
As with your business expenses, you should keep track of what you give to charity, and ensure that donations are counted against your tax bill appropriately.
Very few small business owners enjoy paying their taxes – but with a bit of advance preparation, you’ll find it much easier to stay on top of the necessary paperwork.
As well as reducing the stress associated with meeting tax deadlines (and avoiding the potential fines for failing to do so), good tax planning also means you’ll be paying closer attention to your income and expenditure – potentially resulting in a much more successful business.