Small Business

#

Intellectual Property

 December 02, 2019

How Small Business Owners Save on Taxes

Small business owner on her phone talking about taxes

By forming your own business, you may be able to lower your taxable income. Plus, you gain the flexibility to decide exactly how you want to file your tax return. In addition to being taxed as an S Corp., a Limited Liability Company (LLC) can choose to file as a sole proprietor or partnership to continue claiming your earnings as an individual or you can petition to file as a corporation for even more options.

Tax Benefits

  • Potential tax savings based on your income bracket. Corporations are taxed at different rates than individuals.
  • Depending on your level of income, your earnings may be taxed at a lower rate for your business than they would be if claimed by you as an individual.
  • The option to pay yourself a fair salary, which can be deducted from your taxable earnings as a business expense.

Deduct the Cost of Doing Business

  • Operating a small business allows you to write off various expenses such as work computers, relevant software, employee salaries and even your internet and phone bills.
  • You can formally lease your own personal assets to your business to deduct the costs from your taxable income. This can include anything from property for an office space to a company car.
  • In many cases, you can even deduct the cost of forming your LLC. (Certain rules and restrictions apply. You can only deduct up to a $5,000 for this purpose).

Protect Your Assets

There are several additional benefits to forming a business and lowering how much you pay in taxes is just the beginning. Properly utilizing a business entity can also help provide personal liability and asset protection. This added layer of protection is why it’s called a Limited Liability Company.

Find out more about how forming a small business can help you save.

LegalShield provides access to legal services offered by a network of provider law firms to LegalShield Members through member-based participation. Neither LegalShield nor its officers, employees or sales associates directly or indirectly provide legal services, representation or advice. See a plan contract at legalshield.com for specific state of residence for complete terms, coverage, amounts, and conditions. This is not intended to be legal or medical advice. Please contact a medical professional for medical advice or assistance and an attorney for legal advice or assistance.

Related Content

Top 10 Tips for Small Business Week 2022

Top 10 Tips for Small Business Week 2022

At LegalShield, we celebrate entrepreneurs every week, but we're particularly excited for Small Business Week 2022 from May 1-7. This year, the theme is Building a Better America through Entrepreneurship, in honor of the pivotal role small business owners have played...

DBA vs LLC—What’s the Difference?​

DBA vs LLC—What’s the Difference?​

When starting a business, one of the first decisions you have to make is what type of entity to form. There are a few different types of business structures to choose from, but two common formaitons are the DBA and LLC. In this DBA vs LLC article, we will discuss the...