Creating your business tax strategy: People and Plans

This month’s blog series on business tax strategy would be nothing if it didn’t include a method for creating one. 

That creation comes down to two things: people and plans. 

Without plans, there is no strategy. All your plans, like goals and acquisitions, will help drive your broader strategy. 

So will people, because your strategy will only be as effective as who you partner with and how you interact with them. 

This may sound a bit confusing, but read on, and it will all become crystal clear. 

Ready? Let’s go! 

Plans that drive your strategy

The first plan you’ll want to have in place is a clear business structure. Whether your business is structured as an LLC, S-Corp, C-Corp, or any other entity, it must be tax-efficient for its size and operations. 

For example, a growing C-Corp may start to take heavy double taxation hits. In that case, the business would be wise to re-evaluate its structure to determine if there is one more tax efficient. 

To do that, a business also needs to be very clear on its needs and goals. Identify your current financial situation and any growth plans. This will reveal any existing or potential tax challenges that need to be addressed in the tax strategy. 

So, if you plan to expand to new states or countries, you’ll want to assess things like sales taxes and tax credits in those new locations. 

Speaking of tax credits, plan to identify all available in your operating area, as well as any deductions. Then devise a plan with your CPA to leverage them as much as possible. 

Speaking of tax incentives, let’s look at how people can fit into your tax strategy. 

The human element of your tax strategy

Some of the less discussed tax incentives revolve around hiring. 

In our home state, the Louisiana Quality Jobs Program offers up to a 6% rebate on annual payroll expenses for up to 10 years for qualifying companies that meet the state’s hiring criteria. 

Several other states have hiring programs, as well.  

If your state doesn’t, don’t worry because there are programs at the federal level, too. 

Listing all of them would require a separate blog post, but the Career One Stop website offers a great starting point for employers who are interested in hiring veterans, people with disabilities, and other groups. 

Tax incentives are normally a secondary motivation for this type of hiring, but they can still be significant and need to be considered in a company’s tax strategy. 

Once people are hired, employee benefits can provide another win-win opportunity.  

Educational assistance, 401(k) plans, health insurance, and health savings accounts are just a few of the benefits that can help your people, while potentially reducing your tax burden. 

Everything mentioned here is really just the tip of the iceberg and it’s easy to get caught up in the possibilities. 

It would be great to hire from pools of potential employees that are near to your heart and give them a great benefit package. 

But you must be realistic in your expectations. Speak to your CPA before entering into any incentivized hiring plans or offering benefits. 

You have to be sure your business can sustain the hiring practices or you could face an unexpected tax bill for noncompliance.  Make sure the hiring practices you have in mind align to long term goals and don’t leave your business with a hole in its finances. 

The same applies to benefits. 

First, ensure the benefits are ones your employees want or need. Offering benefits just to chase a tax break can lead to poor morale and potential financial problems. 

The Bottom Line 

A good tax strategy usually has people and plans as its cornerstone. The key to building on that foundation is knowledge of what’s available and how to best use them to reduce your business tax burden. 

Take some time to explore the links listed in this post, then contact a tax professional and start working on a tax strategy today.