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					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.

				
DOCUMENT INFO
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