Tax Planning for Business Owners

Download as PDF

Business tax planning

When starting a business, you must consider several tax-related issues. Although business tax planning is a complicated area, it is essential to understand three major topics: tax consequences when the business is formed; tax consequences when the business generates income or loss; and tax consequences of business distributions. Additionally, you may wish to consider whether your chosen form of business will offer you opportunities to split your income tax liability among family members, thereby potentially lowering your overall family tax bill.

Tax considerations of business formation?

When a business is formed, an owner will typically transfer cash or property to the business in exchange for an ownership interest in the business. It’s important to understand the possible tax implications of this exchange. Tax treatment varies depending on the type of business entity you select. Additionally, you need to be aware of the concept of “boot” and the tax consequences of transferring property encumbered by liabilities to the corporation.

Topics to discuss with your tax professional about how income can be split among family members in a family business to reduce overall income taxes:

  • Income splitting
  • Kiddie tax
  • Excessive compensation of family members
The information contained herein represents the current views and opinions of Westwood Wealth Management and its Financial Planning Group (collectively “Westwood”). The content presented has been curated by Westwood, but the material is the product and property of Broadridge Investor Communication Solutions, Inc., which Westwood has licensed for use and distribution. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable.

This presentation does not constitute an offering of any security, product, service or fund. No investment strategy can guarantee performance results. Past performance is no guarantee of future results. All investments are subject to investment risk, including loss of principal invested.

This presentation is provided without regard to the specific investment objectives, financial situation or particular needs of any specific recipient and does not contain investment recommendations. This publication is also designed to provide general information about economics, asset classes and strategies. All sector and asset allocation recommendations must be considered in the context of an individual investor’s goals, time horizon and risk tolerance. Not all asset classes and strategies will be suitable for all investors.

Westwood makes no representations as to the accuracy or the completeness of any of the information herein. The information in this material is only as current as the date indicated and may be superseded by subsequent market events or for other reasons. Any statements of opinion constitute only current opinions of Westwood, which are subject to change and which Westwood does not undertake to update.