Starting a new business is an exciting opportunity. It affords you the chance to nurture an idea and a mission into a company that grows with your efforts, creates value, and can even offer opportunities to benefit others. However, no matter your mission statement, making money effectively is always a fundamental goal and the engine driving the machinery of your business. To set the stage for and safeguard your success, it’s important to plan, even from the beginning.
For example, how will you handle the tax burden your business may face? Having a sense of the tax planning strategies you should use to keep your obligations low will help you avoid costly pitfalls in the future. Let’s consider a few of the key approaches you can use to your advantage.
Saving up for retirement can be about more than building a nest egg for the future. Making contributions today aids in reducing the reportable income your business generates for you and offsets some of your current tax burdens. You’ll pay tax on these contributions later, but only when you make a withdrawal.
While substantial tax credits aren’t always within reach for every business, making charitable contributions can earn you deductions that help come tax time. At the same time, you can engage your business with the local community to generate goodwill — a win-win for any growing company.
Did you know you can carry forward capital cost allowance claims to future years? There are complex rules surrounding CCAs, but you don’t have to take the full deduction in the first year you can do so. By carefully planning your CCAs, you can create a contingency accessible for a future tax year that could be more financially burdensome.
When it makes sense for your business, employing and paying family members in functional job roles can reduce your tax burden. Like other strategies, this effort focuses on reducing business income. However, by paying family members, you can offer valuable employment opportunities while tapping into skills you need from someone you trust.
Incorporating your business can offer tax advantages — sometimes. The numbers must make sense for your business. There are some cases where incorporation may not impact your tax burden at all, and others where it could offer an adequate reduction. Speaking to a tax professional about analyzing these numbers can make it easier to decide how to proceed.
Every new business faces different circumstances and growing a small business into a successful platform for stability requires navigating many challenges. Appropriate tax planning implemented in the early stages of your growth makes it far easier to accomplish your goals as you work hard — but it can also be a stumbling block.
At Reion Accounting, our family-run business is here to help lighten that burden with our combination of decades of experience and cutting-edge technology. Discover more today about effective tax planning and how our team can provide vital insights into the best legal tax strategies to use in Canada.