The new tax plan for businesses is solidly in place, but there are still a lot of questions being asked regarding if some of the activities that many businesses deduct “really” have changed. The short answer is yes!
There are a number of deductions that have been taken away, however, many of them appear to be balanced out by loosening of restrictions in other areas. Some of the changes may affect you more dramatically based on the ways you do business and cause you to change the way you do things involving your business, or quite possibly making it a good idea to hire a knowledgeable tax advisor to help you plan for these changes.
Here Are Some of The Ways Your Business Can Adapt to The New Tax Reform
You will have to control your income and profits. If your business is a pass-through business, like more than 90% of small businesses, you may benefit from a lowering of your taxable income from that business by 20%. This is meant to spur you to reinvest in your business or maybe even take on additional employees. However, many service type businesses, like doctors or lawyers, may not be able to take advantage of this in some instances so it’s important for you to understand how your business is regarded. Again, this is an area where your tax advisor can help to make sure you are using the most tax efficient strategies for your situation. It is also important to consider paying yourself “reasonable compensation so that you are maximizing your benefit.
You can grow your company. A large drop in the tax rate for C corps and the introduction of the Qualified Business Income Deduction for pass-through entities might not only make a real difference to your company, but in the way you do business with others. This friendlier tax base percentage might be able to keep companies from going overseas to operate and make it easier for your business to keep more of your income. Theoretically, this also might be the year you are able to start looking at expanding your business as you run projections for your profits and the associated savings in taxes. This year, many businesses should employ tax-savvy business advisors who can guide them on the path to growth in this still-complicated tax environment.
You Can Reinvest in Your Business. Now is a great time to put some money into your business as elements of depreciation under Section 179 have changed in favor for many businesses that want to purchase certain types of vehicles and even used equipment. There are exclusions of course and getting advice on not only what can be deducted but how to structure the purchases can make sure you maximize your deductions.
You May Change How You Give To Charities. The new tax laws have eliminated the business deduction for charity golf and other special charity sporting events. You can no longer deduct either participating in, or even attending a charity sporting event. You must now claim the deductions as basic charitable deductions, giving you a much smaller deduction than before. If you are involved in specific charities, there may be ways in which you can continue to help yet maximize your deductions.
You Can Start Talking. Presentation expenses are now completely deductible. While having an intimate dinner might be a great way to show one client how smart you are, presentations allow you to show lots of people also how smart you are. This can lead to better prospects being taken to those previously mentioned non-deductible meals. The big word in this deduction is “the public”. If you prospect and give a presentation to a small group of business owners, that is “the public”, and 100% of your expenses are deductible.
As you can see, there are many changes in the tax law that affect your business and can cause you to think about the ways you actually run your business. This should be the year you start to look for a tax advisor that can not only navigate the new tax laws, but the ways you actually structure your business moving forward to maximize your profits and reach your goals.
Do you want to start your own business and be an entrepreneur? Though the idea is attractive you should know the pitfalls that lie ahead and what you need to do to make a success of it. And while it can be stressful, the flipside is that it can also be professionally, personally and financially enriching.
To guide you, here is a checklist of Ten important factors to keep in mind so that you are successful. Use these as guidelines to see that you are the right path and you have a viable business plan, accurate information and clarity on various aspects of the business.>
Is your product or service what people want? Entrepreneurs always have to identify a need or want and then go for it rather than assuming that people will go for what they want to sell.
Cash is essential. Ensure that you have enough money to start and run the business and keep in mind that you need to start generating profits quickly so that you can keep your business afloat, rather than having to keep on pumping money to do so, which can make you cash poor fast.
Reduce costs. When you reduce your costs you are increasing your profits (or potential profits). You need a positive cash flow so that more money comes in than goes out.
Err on the side of caution by overestimating expenses and underestimating income. Most people do the reverse and then get shocked when they find they are losing money. When you start a business you are bound to have some fixed and recurring expenses and some variable ones, so budget for those.
Marketing and sales are the lifeblood of the business. You need marketing so people know what you are selling, but you also need sales to generate cash. A satisfied customer should turn into a repeat customer. Entrepreneurs need to start selling the product as soon as possible.
Improve your profitability. A social media presence and a website will help in marketing, generating leads and converting these into sales. As you increase the sales price point average and boost the number of repeat customers you will enhance your profit margins.
Evaluate, appraise and calculate everything. You need facts and figures in place so that they can be quantified and checked and it is only then you will know your business’s strengths and weaknesses and which areas need more work.
Never be complacent and stop learning. As you keep learning you will keep earning – and that is the bottom-line that you want when you start a business, particularly if you have never started a business before.
A successful business depends on many factors including providing a quality product, sales, marketing, operations and knowing your customer. You never stop learning when you are running your own business.
If there are particular aspects that you feel you don’t know enough about or don’t have the time or expertise to handle, hire an expert and/or delegate the work. All entrepreneurs have to go through the learning curve.
Once you are committed to growing your business and follow the right path, your business can grow exponentially and reach stratospheric height, leading to greater satisfaction and more money.
As far as your product is concerned, avoid discount, but add value. When you offer a discount, you are reducing your profitability directly. Offering additional value (apart from the actual value of the product) is a further enticement to the customer to buy.
Take help. A coach, a mentor or a professional can help you find the answers you need and look at your business and figures dispassionately and objectively, identify areas that need more work, improve profitability and keep your business afloat.
At FMA, C.P.A., we take pride in being a proactive trusted advisor that helps our clients meet their goals, stay in compliance and help them grow their business. Our business advisory team can help you with four key areas including compliance, tax efficiency, organization and strategic financial services. Call us today to get more information about our business advisors and how they can help you get the most out of our services.