Minimize Your Taxes as a Small Business Owner

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If you are a small business owner then you are likely looking for way to minimize your taxes. Some of the ways to do this include choosing to hire family members, allowing family members to purchase shares in your company, and keeping track of how much you use your vehicle for work purchases by keeping an accurate log. If you would like to write your home office off as a business expense you must keep records of everything

No small business owner wants to pay more taxes than they need to. The good news is that there are ways to minimize your taxes, regardless of whether you have incorporated or have chosen the sole proprietor route.

Hire Family Members to Work for You

It is common for people to enlist the help of their loved ones when they are getting their business off the ground. To help lower your taxes it is smart to hire family members to do such things as the bookkeeping, placing order and picking up supplies for the business. If you hire people from within your own family this means that as the owner of the business your salary will be decreased because you will be splitting the income amongst yourself and your family members who are now employed by you. This in turn causes the family to be placed into a tax bracket that is lower than before and this means that everyone ends up with more money in their pocket, not less.

Shares and Your Family

If your family members buy shares in your company then this is another way to minimize your taxes and split the income that everyone is bringing in. Shares are joint or partial ownership of a company. There are different types of shares but some of the most common include are ordinary shares, preference shares or partly-paid (contributing) shares.

Vehicles and Transportation

Small business owners often use their own cars or trucks to conduct business. If you do this then make sure you keep an accurate log of how many miles you drive on a regular basis. It is important to keep accurate records in order to be able to write off all of your business expenses when tax time rolls around. Make a note in your log every time you use your vehicle for a work purpose including where you went, what you went for and how long you were gone.

If you function as a sole proprietor then you will need to add up all of your transportation costs and you can claim this as a business expense on your tax return. This will include such things as gas, oil, car insurance and maintenance on your vehicle. For those business owners who incorporate, you will be reimbursed by the corporation related to the guidelines and based on your mileage.

Home Office

Keep records of everything that relates to your home office including your rent or mortgage, your utilities, your household maintenance expenses and any improvement you make on your home. These expenses can all be claimed on your tax return according to the amount of space your home office takes up in your residence. For example, if your home office takes up 10% of the square footage of your home then you can claim 10% of business related expenses on your tax return. If it takes up 15% then you can claim 15% and on it goes.

It is important to be aware that this only applies if you use your home office full time. If you have an office at home and also another office somewhere else then the part time status of the office only allows you to claim 5% of your expenses. This is the same whether you are incorporated or a sole proprietor.

Finding ways to minimize your taxes can help reduce stress and this is very important in regards to your health. The stress of switching from a nine to five job to being a small business owner can be stressful enough so it is important to take excellent care of your health in every area.

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Disclaimer: Ideawala.com does not recommend or endorse the products or services mentioned by the authors. We have not verified authors' credentials. We do not guarantee the accuracy of the information in the article or the earnings claims. Nothing in this article should be construed as business, legal or tax advice. Please consult a professional business advisor, an attorney or an account for specific advice in your situation.

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