The small business tax rates are generally lesser than other businesses. The governments offer a number of deductions in small business tax in order to promote the small business industry in the country. By enlisting the business as small business, the businesses can enjoy lower business tax rates.
In the USA, a business may be defined a small business if the number of permanent employees working is less than 100. But in the European Union the maximum number of employees working in a small business is 50. Internal Revenue Service (IRS) provides different small business tax rates for the different types of small businesses.
The various types of small businesses are � corporations, partnerships, sole proprietors, S corporations and limited liability corporation/partnership. The IRS offers different tax forms for the different small businesses. The tax deductions schemes are also different for the businesses.
The small businesses need to maintain accurate information regarding business expenses, earning, losses and profits. The small businesses owners are likely to handle IRS audit three times more than the non-owners.
The small businesses also need to maintain their information up to date in order to qualify for the tax credits and deductions. There are some ways by which the small business owners can save their money. Incorporating the business can be helpful to save taxes. Both in cases of the proprietors business and partnership businesses, incorporating the business is beneficial to limit the liability. The small business owner can enjoy lower tax rates and other tax advantages by incorporating the business. Being home based small business also helps the business owners to reduce the tax burdens considerably.
By the process of income split the small business owners can save money from being taxed. This can be done by paying wages to the spouse and children. The business owner can thus legally divert the income and enjoy the lower tax rates if the family members fall in a lower tax bracket. By documenting the expenses in a planned manner, the owners can save some money. It�s necessary for the business owners to keep all the receipts for business expenses to avail small business tax deductions.
Last Updated on : 29th July 2013