Owning a business allows many freedoms and possibilities, but it also comes with a sense of responsibility to protect your future, your family, your net worth, and your estate.
If you are a business owner, it’s in your best interest to perform your due diligence when it comes to matters of how your business can affect your personal taxes as well as your estate planning.
Contacting a tax law and estate planning attorney with any questions or concerns about owning a business is a smart and proactive idea.
The Impact of Owning a Business on Your Personal Taxes
If you own a small business, you will likely need to make estimated tax payments throughout the year on a timely basis. You will also need to keep track of business expenses separately and make sure you can substantiate claimed expenses and proof of payment.
Some businesses may be able to claim a home office deduction. There are requirements and restrictions if a home office exemption is claimed, and it is important to understand them. For example, the size of the deduction depends on the proportion of home used for the business.
In the event your business is audited, you will need to be able to substantiate any expenses you claim. Doing this work ahead of time will save you a lot of time and headache if you need to respond to a document request during the course of an audit.
Failing to file the appropriate returns on time or maintain substantiation for expenses may lead to increased taxes, penalties, or interest.
Estate Planning and Owning a Business
You’ve worked hard to establish and run your business. Ensure the future of your business by setting provisions in your estate plans.
Buy-sell agreements should be considered as part of the overall estate plan. This can be very useful down the line if one of the owners dies or becomes incapacitated. A lawyer familiar with tax, business, and estate planning laws can discuss the value of having this agreement in place.
A business succession plan should be drawn up and implemented. Your business succession plan should be very thorough.
Failure to plan for your business ahead of time could cause a sudden vacancy in the company’s leadership. This could cause a negative impact on the culture of the business if employees are concerned about their positions or how the business will operate moving forward. These and other factors may ultimately put the business in a poor financial situation. There are many other reasons it is important to have a business succession plan. If you have questions or concerns, you should consult with a lawyer.
Should you find yourself in need of a tax law and estate planning attorney, please contact Mendes Weed, LLP. For your convenience, we have offices in Walnut Creek, San Francisco, Oakland, and San Jose.