It’s the time of year when everyone is worried about how much they will owe the IRS. No one wants to pay taxes. As a entrepreneur or business owner, you want to keep as much money as possible. You may have told your CPA or tax adviser to make sure you pay as little tax as possible. In some cases, you may be showing a business loss each year so that no taxes are do to the IRS.
This may not be the best strategy for your business or personal financial security. In fact, showing losses year after year may result in some devastating consequences. A business that continually shows losses will probably not be able to obtain a line of credit or get a conventional bank loan. Your business credit may also effect your personal credit and effect your ability to obtain a personal mortgage or other forms of financing. Continual losses will adversely effect the net worth of your business and your personal net worth.
Ask yourself these questions:
- What are the goals for your business?
- Do you want to sell your business?
- Do you want to pass it on to the next generation?
- How does my business effect my personal finances?
Your financial statements and the financial condition of you business, effect your ability to achieve these goals. Typically, banks, buyers, and other financing institutions want to review your business tax returns and personal tax returns before lending you money. They want to make sure the business has worth and that you are credit worthy. Your tax returns and profitability of your business effect whether you will be approved for financing and the interest rate. They also will have an influence on the worth of your business when you are ready to sell or transfer the business.
It is important that you share your goals with your accountant, CPA, or tax adviser. Good tax planning will help protect your assets and assist you in keeping more equity in your business. Make sure you are keeping some money in your business. Remember, paying taxes means your business is profitable and it gives you options as a business owner. That doesn’t mean you have to like paying taxes. I do not like to pay them either.
To learn more about business strategy contact me on my website www.debicorriecfo.com.