Tax isn’t something you use to your advantage. It’s a necessary evil that you have to deal with if you want your business to be successful. Sure, you can scrimp and save here and there, yet it won’t impact your bottom line too much.
What if the conventional wisdom regarding tax wasn’t true? What if you could use it to your benefit year after year? Most companies can. Sadly, they let the myth that tax is a hurdle get in the way of the organization’s best interests. The good news is, you can change that in a flash with the following tactics.
Contribute To Pensions
Investing money into employees’ pension pots is a legal necessity in many states. Logically, it makes sense because the wealthier a worker is when they retire, the less the government has to contribute. Businesses must equal what individuals put in, depending on the amounts. However, this is healthy because pension contributions aren’t classed as benefits or assets, which means they reduce the company’s overall trading profits. As a result, you’ll pay less corporation tax for the year. The key is to balance how much you can put into pensions while reducing tax enough that the business wins in the long-term.
Pay Dividends
Dividends are like bonuses. You can pay them to anyone who owns shares in the company, as long as the business has enough liquidity to cover the costs. By handing them out to individuals, you can lower your tax contributions again since they aren’t taxable. The people who receive them have to consider what they’ll do to their returns, yet the majority of shareholders won’t turn down money, even if it takes them into another tax bracket. As long as they are recorded properly on your end, the responsibility is on the person who receives a dividend, not the firm.
Start A Franchise
You may know a lot about tax as you’ve dealt with it for years. Some entrepreneurs don’t bother with an accountant to save money, for instance. If you fall into this category, you’re an ideal person to launch a tax franchise and use your experience of the industry to help others. This is probably the best way to improve your profit margin because the amount of revenue you can secure by enhancing your earning potential is massive. And, franchises are easier to make successful as they already come with a range of tools and assets.
Take A Low Salary
How much you earn will impact how much tax your business has to pay. After all, you’re the boss. Thankfully, you can take the lowest possible amount that enables you to qualify for a federal pension. What about the rest of your earnings? You can take these in different forms, such as bonuses. Bonuses have different stipulations, depending on what they are, which means your exposure is lower. Also, taking a low wage means you will only be personally eligible for the minimum tax contribution.
There are several ways to use tax to your advantage. Which one will you pick?
