Taxation Law For Small Businesses

Taxation Law for Small Businesses
Taxation law is​ a​ complex and in-depth area of​ concern for the​ small business owner .​
With potential pecuniary and criminal consequences,​ it​ is​ of​ paramount importance to​ ensure as​ a​ business owner,​ you​ are familiar with the​ tax consequences in​ your jurisdictions,​ and the​ ways in​ which you​ can minimise your liability .​
Whilst one of​ the​ most legally important things to​ understand as​ a​ small business owner,​ taxation law also provides an​ excellent opportunity for saving money and increasing profitability within a​ small business environment .​
in​ this article,​ we will look at​ some of​ the​ main and most common tax implications of​ running a​ small business,​ and some of​ the​ most effective ways of​ ensuring you​ pay less tax through your small business operation.
Tax regimes vary from jurisdiction to​ jurisdiction,​ and the​ implications of​ running a​ small business also vary,​ both in​ terms of​ the​ legal and financial requirements .​
Having said that,​ there are a​ number of​ common elements that transcend jurisdiction and appear in​ numerous guises across various systems that can be of​ use to​ the​ small business owner .​
One of​ the​ first things to​ consider as​ a​ small business owner is​ to​ establish a​ limited liability company .​
the​ primary reason for this is​ that limited liability companies usually provide a​ more relaxed tax regime as​ compared to​ income tax liability .​
a​ sole proprietor operating out-with the​ parameters of​ a​ corporate entity is​ liable to​ account for profits as​ income,​ which can lead to​ a​ greater tax liability and potential individual state contributions .​
as​ a​ corporate entity,​ the​ owner can pay himself via share dividends,​ which carry a​ lower tax liability and thus minimising his overall liability to​ tax .​
This is​ significantly better than paying oneself a​ wage,​ which bears the​ tax liability from both ends,​ i.e .​
the company is​ liable to​ taxation as​ is​ the​ employee.
Another essential for the​ small business owner is​ what is​ known as​ capital allowance .​
By means of​ capital allowance,​ business owners can offset the​ acquisition cost of​ assets on​ a​ graduated scale in​ accordance with the​ specific principles of​ the​ regime in​ question .​
This is​ in​ effect a​ deductible expense,​ which ultimately minimises yearly tax liability .​
There is​ a​ particular benefit in​ that many regimes allow an​ accelerated relief for business assets .​
This can be exploited to​ an​ extent by acquiring assets through the​ business,​ for example a​ car,​ which can also be used for personal purposes .​
Rather than buying a​ car from personal income,​ buying it​ through the​ company allows you​ to​ offset the​ amount of​ the​ expense quickly against your business profits,​ which ultimately reduce your liability to​ tax .​

Before embarking on​ any tax reducing strategies,​ it​ is​ important to​ ensure you​ are acquainted with the​ specific laws of​ your jurisdiction to​ avoid running into trouble with the​ authorities .​
in​ some of​ Europe,​ for example,​ there is​ a​ requirement to​ declare any specific tax minimising strategies to​ the​ government to​ allow for rectification of​ loopholes .​
It is​ important to​ ensure you​ are acquainted with the​ specific laws to​ avoid potential criminal liability as​ a​ consequence of​ ignorance .​
By familiarising yourself with the​ laws in​ your jurisdiction,​ you​ can avoid the​ potential pitfalls and create a​ tax planning strategy that provides the​ most cost effective solution for you​ and your small business.
Taxation Law For Small Businesses Taxation Law For Small Businesses Reviewed by Henda Yesti on July 03, 2018 Rating: 5

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