Whether it is a financial transaction, an investment or real estate purchase, nearly every transaction is taxed. Tax planning involves mitigating risk and liabilities to find the most economically viable business solution. Tax law is highly specialized and failing to consider tax consequences is detrimental to business growth and development.
When is tax planning applicable?
In its most simplified form, tax planning is a way of effectively arranging your business affairs to postpone or avoid taxes. Tax planning should be taken into consideration in almost all aspects of the business. From day to day corporate transactions, structured exchanges and mergers and acquisitions, the purchase or sale of business goods are taxed and should be considered before commencing the transaction. Taxes play a large role in real estate purchases and investments as well and taking the time to review tax planning options can help a buyer finalize purchasing decisions.
Recent tax changes
With the recent changes in tax legislature, businesses may not fully understand the new tax advantages available. Notably, the new corporate tax rate of 21 percent is significantly better for corporations than the previous rate of 35 percent. Small business owners are now eligible for a 20 percent tax deduction as long as they meet the income requirements. Also, businesses should consider the new ability to completely write off capital expenditures when contemplating equipment purchases.
Maximizing tax planning effectiveness
For maximum benefits, it is in your best interest to seek legal advice early in the transaction. Tax planning should never be an afterthought leaving your enterprise exposed to potential tax liabilities. The goal of tax planning is to complete the transaction with minimal taxes and adverse business effects. Effective tax planning adds value to the transaction while minimizing the risk, making it a best practice for business success.