People are often under the impression that you would not have much work to do if you were an entrepreneur during your day. It is a common misconception that business owners only spend two to three hours in their office daily to check that things are happening in order. After that, they leave and enjoy the rest of their day while their employees work nine to five. However, that is just a conclusion people develop in their minds by observing an entrepreneur’s routine, which is why it is entirely wrong.
An entrepreneur’s daily tasks are much more hectic and mentally draining than an employee’s. Entrepreneurs must think in all directions when working for their business’s growth. Tasks like creating a comprehensive business plan and overlooking new employees’ hiring processes are all part of an entrepreneur’s job. While managing these tasks, an entrepreneur must consider taxes‘ impact on their business.
Here are a few tax tips that every entrepreneur should know if they are looking to obtain maximum tax benefits while getting their business finances structured.
The Difference Between Hiring Employees or Subcontractors
One thing that every entrepreneur must know is the difference between hiring employees or subcontractors. Tax rules and obligations are different in both cases. The company must pay full-time employees specific social security and health-related tax benefits to which contracted or freelance workers are not entitled.
Freelancers and subcontractors are also hired for a specific project, and their term/contract ends when the project ends.
Keep Separate Accounts
Another critical factor entrepreneurs must not ignore before starting a business is keeping business and personal accounts separate. It is an essential practice for tax purposes. No one knows if their company will excel or result in a flop idea. Nevertheless, they must consider the possibility that their business will grow and run for the long term; hence, they must keep both accounts separate so tax authorities can deal with both funds according to different regulations.
Experts say that if personal and business funds are combined in any way, then complications occur in terms of business tax debts. These are problems related to shareholders and board members and can involve tax regulatory authorities’ penalties.
Structure the Payroll Account of the Business
Due to some tax obligations, entrepreneurs must provide a proper structure to their business’s payroll account. Tax regulatory authorities strictly check these matters and scrutinize companies not paying their tax dues associated with the payroll. Employees bring tens of scheduled payments and tax forms, so entrepreneurs must know these matters.
Start-up Tax Deduction
When an entrepreneur is planning to start a business, there are certain expenses that they usually rack up. Such expenses can be used as a tax deduction. In most states in the US, an amount of five thousand dollars can be deducted as a tax deduction in the name of start-up costs and research and development. In the name of research and development, conclusions include the costs of employee training sessions, checking the viability of the business idea, ordering supplies, etc.
Claim Depreciation
Entrepreneurs can claim the depreciation of business items with time. Deterioration of the physical state of resources and supplies, fleet, or office vehicles can all be claimed by the business owner. As per the latest regulations from the regulatory authorities, machinery, furniture, buildings, cars, and other equipment are all depreciable, along with other intangible items like copyrights, patents, and software.
Entrepreneurs have two approaches in such cases: either they claim the depreciation of their business’ properties and resources periodically to improve their tax situation yearly, or they take the lump sum approach.
Conclusion
Apart from these, entrepreneurs must learn many other tax tips before starting their venture. These tips can also benefit an already operational business and help the owner improve its tax situation. Indeed, new entrepreneurs have too much on their plate; tax planning is something they must not ignore.
Such practices can help entrepreneurs save quite a fortune for their business eventually.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.