The Top Five Tax Drawbacks for Small Businesses

Unfortunately for small businesses, for every one that opens another one closes down. One of the main reasons for that statistic is a lack of knowledge about taxes. Lack of understanding of the tax laws, poor decisions, and a failure to seek out a tax professional can be detrimental to many business owners. Being aware of the tax breaks that are available to you is a vital step in keeping your company from taking a nosedive. As a small business owner and entrepreneur, it is definitely a challenge to be able to structure your business in a way that would keep Uncle Sam happy. The five following steps can prevent tax headaches for those contemplating starting a small business as well as those already in business: 1) Be careful on how you choose your business: The government will tax you on what type of business you establish. A small business can greatly affect its tax status based on how they choose to operate. 2) Have a well-planned budget: Many new or seasonal businesses find themselves at tax time with no cash set aside to pay their taxes. Note of caution: Even if your business does not have the money to pay the tax bill, you should still file. You may not be able to get away from the penalties and interest, but not filing will bring you a far more severe penalty.

3) Have knowledge of tax laws: The Section 179 deduction allows small businesses a deduction (upfront) of the cost of placing equipment into service. Many business owners are not aware that for 2006, they can write off up to $108,000 of the cost of that new equipment. 4) Take advantage of tax breaks: Even the most intelligent businessperson can become confused by the tax laws, but knowing and taking advantage of tax

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