Melanie has spent the last five years working as a veterinarian and is ready to open her own practice. Her colleague suggested reaching out to a Cary business tax attorney to assist with the formation of her business, as legal counsel was a key aspect of the establishment of his own business. After speaking with an attorney about her goals and ideas, Melanie has determined the optimal business structure for her practice and understands how to effectively reduce her income taxes through targeted minimization strategies.
With economic headwinds and an ever-changing political landscape, it can feel difficult to plan for the future of your business. Fortunately, by employing a robust tax plan with effective minimization strategies, it is possible to maintain flexibility in light of unexpected incidents. Our team of Cary business tax attorneys understand how to leverage tax laws to your business’s advantage, saving you time and money in the long term. To learn more about how we can implement a tax strategy that works for you, consider contacting our Cary office at (919) 900-4720.
Tax Minimization Strategies
Minimizing tax obligations and liability is a key concern of many business owners. Effective tax planning strategies can help you save a great deal of money on your tax bills. By fully utilizing available deductions, timing expenditures appropriately, and investing strategically, it is possible to minimize the amount of taxes you pay on business activities.
After reviewing your present circumstances and financial goals, our Cary business tax attorneys can employ a range of tax minimization strategies such as:
- Leverage tax incentive programs. Programs such as the Qualified Business Income Deduction and various North Carolina business tax incentive programs offer valuable opportunities to bypass certain business taxes and costs. The Qualified Business Income Deduction, a federal program offered by the IRS, offers some owners of pass-through businesses the ability to deduct up to 20% of their share of the business’s qualified income. Similarly, the North Carolina Department Commerce maintains a range of programs for businesses in certain industries, offering tax incentives to spur economic activity in the state. Effectively leveraging these tax incentive programs can help minimize your business’s tax burden.
- Properly time big expenditures in your business. Most business assets can be deducted in part every year as the asset continues to depreciate. Under 26 USC 179, however, specific assets can be fully deducted the same year that they are put in service. The maximum deduction under this law is $1,000,000 per year. By timing these major expenditures, it is possible to minimize the amount of taxes paid on business expenses.
- Utilize tax-free benefits: As a business owner, you are aware that your share of business revenue – as well as your employees’ wages and salaries – is subject to income tax. To minimize this tax burden, it is possible to implement fringe benefits for both you and your employees. A qualified retirement plan, for example, allows for tax-deferred contributions. Other benefits including health insurance and disability insurance, for example, also provide notable tax benefits for your business.
Tax Strategies for Key Business Decisions
Business Formation
The ideal time to consider tax liabilities is during the formation of your business. Our team of Cary business tax attorneys guide our clients through this process, taking into consideration their long-term goals, business operations, and financial portfolio to suggest effective tax solutions. The business structure that you choose when forming your business will have a major impact on the taxes you will pay on any income earned by your company. For example, LLCs and corporations generally offer greater tax protections than sole proprietorships and partnerships.
When establishing a tax strategy for the formation of your business, consider the tax deductions available for eligible start-up business expenses and how your income will be reflected in your personal tax statements. Ensuring that your business is well-structured at the very beginning of your entrepreneurial journey is key to minimizing your tax burden long term.
Organizational Restructuring
The tax liabilities involved in organizational restructuring are complex, requiring a detailed knowledge of federal tax code and state laws. Most changes in an organization’s structure will have tax implications, making it important to consult with an experienced attorney before undergoing these alterations. Waiting too long to consider the tax implications when restructuring your business can create tax inefficiencies or result in your missing key opportunities to better position your company.
Mergers & Acquisitions
Designed to expand the capacity of a business, mergers and acquisitions may be an important part of a company’s growth strategy. Many business owners overlook these elements due to a focus on the contracts and negotiations involved in the transaction. As a result, these steps forward can be frustrated by unexpected tax burdens and liabilities. There are different tax implications for the buyer and for the seller. The buyer must worry about stock and equity sale as well as the sales and use tax compliance of the target company. The seller, on the other hand, should consider the taxes associated with asset purchase and sales or transfer taxes.
R&D Tax Credits
For businesses and organizations that invest in research and development (R&D), tax credits may be available to further incentivize this innovation (Section 41 of the Internal Revenue Code). This federal program provides tax benefits to companies that engage in activities related to the design, development, or improvement of products, processes, formulas, or software. These credits are available to businesses in a range of industries, including, but not limited to:
- Architecture and engineering
- Food and beverage
- Software development
- Manufacturing and machining
- Brewery and winery
- Automotive
- Agriculture
- Life science and chemistry
If you meet the standard of qualified research activity set forth by the IRS, these tax credits provide a dollar-for-dollar minimization of income tax liability and reduce your business’s tax rate. An experienced Cary business tax attorney can provide more insight into whether your business qualifies for federal R&D tax credits.
How to Choose the Right Business Tax Attorney for Your Practice
An experienced business tax attorney will review your situation and offer strategic solutions to minimize your tax obligations and optimize your profits. Every attorney approaches tax issues differently, however, making it important to choose the right business tax attorney for your practice. First, identify law firms in your area that handle tax matters for businesses. Review their website and ensure that they offer services related to business tax planning. Then, once you have compiled a list of potential attorneys, consider scheduling initial consultations to discuss your business.
The initial consultation with a prospective attorney should provide you with enough information to determine whether their services are a match for your needs. Ensure that you feel comfortable speaking with the attorney and that you are confident in their knowledge and expertise. Your Cary business tax attorney will ideally serve as a trusted advisor to your business endeavors, making it important to select a lawyer who takes the time to understand your business goals.
How Can NC Planning Help You Plan for the Road Ahead?
Tax planning for your business is an arduous and complicated task, requiring a detailed knowledge of tax law and its interplay with business activities. As such, many business owners turn to Cary business tax attorneys for trusted advice and guidance on these matters. To begin the process of optimizing your tax benefits today, consider contacting NC Planning at (919) 900-4720 or scheduling a consultation.
