We get it. As a digital-first business owner, you’ve got more on your plate than you can chew. Dealing with suppliers and manufacturers, troubleshooting technical issues, fending off competitors, and keeping customers happy—all while keeping your coffee from running too low—is a daily battle.
To say that the startup scene is the new frontier of the digital wild west would be a slight exaggeration.
During all that chaos, crunching numbers and wading through tax regulations are probably the last things you want to spend your evenings on.
We don’t blame you. There’s nothing glamorous about tax planning. But what tax strategies lack in glamour is made up by all the financial opportunities and competitive advantages they offer.
If you’re undecided on pursuing tax planning for your eCommerce business, consider these three significant advantages before you make your final call.
1. Tax Planning Can Save You More Money Than You Think
Entrepreneurs know that tax planning can save them money. But what they don’t realize is how much more they could be saving by hiring a competent tax advisor.
It’s not uncommon to see entrepreneurs, especially those running online businesses, handing off their tax matters to a parent’s CPA or an old buddy from college who now files tax returns for a flat fee.
The result is that these business owners don’t realize the true extent of money they’re just leaving on the table. Nobody tells them that tax savings can give them more than a bonus check from Uncle Sam.
To squash such misconceptions, we’ve put together this list of tax-saving methods right off the top of our heads:
- S-Corp Declaration: Even if your business is registered as an LLC and you don’t want to deal with the complexities of registering a proper S-Corp, you can still elect to be treated as one and easily save up to 15% on your tax bill.
- Tax Deductions: Internet, cell phone, rent, software and services, travel, and office supplies are just some expenses that you can easily file as tax deductions. All your marketing and other digital expenses can be deducted with proper planning too.
- Accountable Plan: This is a game-changer for businesses operating from home as you can easily file your rent, cellphone, car, and even travel expenses as a cost of doing business. By opting to be treated as an employee of your company, you can get a tax deduction for most of your expenses.
- Plan Income and Expenses: The more income you make in a year, the higher your tax rate. This opens exciting avenues for tax savings when your income falls under a higher tax bracket than usual. For instance, you can have a controllable income (like a sale event) delayed until next year and pay a lower tax rate at that time. Similarly, you can arrange expensive payments during a tax year where your income is in the highest tax bracket, netting you maximum deductions per dollar spent.
These less than a handful of tax strategies alone can substantially lower your yearly tributes to Uncle Sam. Add to it the arsenal of weapons a veteran tax advisor brings to the table, and you can see how tax planning can make a tremendous difference in your bottom line.
With the cutthroat competition of today’s digital commerce, just a slight increase in profit margins can mean a leap over your competitors.
2. Tax Planning Can Keep Your Business Alive
A typical reservation among eCommerce business owners is that they don’t have the time or resources to invest in tax planning at the moment. From their standpoint, it seems like they have a million better things to invest in. After all, why try to fix what’s not broken?
The reality, however, couldn’t be any further. You see, times of relative peace and prosperity in a business journey are the perfect moments to invest in tax planning.
During high-stress situations, whether that’s exponential growth following the success of an ambitious campaign or an aggressive takeover of market share by a competitor, the last thing you want is to run into tax troubles.
We’ve often seen a scenario where businesses fail to maintain proper cash flow for tax season. Add to it the real possibility of surprise taxes because of a lack of proper planning, and you can see how businesses get caught with their pants down when the IRS comes for collection. Unfortunately, they don’t care if you thought your tax bill was going to be lower.
Speaking of which, a competent tax advisor can take surprises out of your life by preparing pretty accurate estimates of what you’ll owe to the national coffers. With this knowledge, you can easily maintain enough cash flow to meet your tax obligations on time.
Tax troubles are bad news in good times, but they can be fatal in tough times. So by investing in tax planning today, you can proactively plan against harmful scenarios and stop them in their tracks. A much better strategy than passively reacting to one fire after another.
3. Tax Planning Can Be Your Slight Edge
Here’s what we’ve established so far. Tax planning can have a direct impact on your company’s bottom line. It can also help your business sail through the thunderstorms of today’s saturated markets.
Now, here’s the exciting part. Most of your competitors prefer the thrill of risky campaigns and growth tactics over the safe and steady investment of tax planning. By going against the grain, which is what tax planning is in the eCommerce sector, you can gain a competitive edge for your brand.
Don’t get us wrong. No accounting wizardry can compensate for all the shortcomings of an organization. But with the right tax strategy, you’ll have the edge over your competitors—a slight advantage that can completely change the trajectory of your business thanks to the compounding effect.
Because as bitter as the statistics are, the truth is that over 80% of businesses fail within a few years of operations. Bad financials are a leading contributor to that figure, as running out of cash is a scenario that frequently pops up.
So by strategically navigating the landscape of tax regulations and proactively fighting against any surprise scenarios, your company will thrive both in good and challenging times.
To see what tax planning can do for your business specifically, book a free, zero-obligation consultation today.
