Entrepreneurs choose to incorporate their business for many different reasons. Some of these reasons include: increasing the credibility of your business, protecting your personal assets and identity, as well as saving money on taxes. With the 2015 tax season coming to a close, this last item likely hits home for many new businessmen and women…
Below are some examples of tax advantages that can result due to incorporation.
Research what’s best for your business.
Deciding how you want to incorporate your business is something you should consider carefully. There can be certain tax benefits offered to C corporations, and entirely different benefits given to LLCs. Tax breaks also depend on which state you incorporate in. Because of these factors, it’s highly recommended that you spend time researching what is best for your business.
Social security tax deduction.
The salary and earnings that an employee of an incorporated business receives is subject to taxation. However, if there is money left that goes back into the business or is dispersed to shareholders, then it is not subject to social security taxes and you can save up to 15%.
Losses can be deducted.
Once your business is incorporated, you will be able to deduct any losses from your income tax. Some examples of the types of losses you can write off are startup costs, damaged goods, or goods that are old and out-of-date.
Business items can be written off.
Once incorporated, you will also be able to write off many items that you use for business purposes. For example, a car or truck that you use for work can be written off and all the expenses that come along with owning it – such as gas, mileage, and maintenance costs.
Tax law can be confusing, especially for a new business owner. If you have any questions regarding taxation and incorporating, please contact us at any time for advice.