What Should a Business Tax Plan Include?
Things for Arkansas entrepreneurs to consider
on January 22, 2020
Updated on August 4, 2022
For entrepreneurs and small business owners, the importance of tax planning cannot be overstated. A comprehensive plan can go a long way towards helping to keep your business on stable financial footing. As noted by the Arkansas Department of Finance and Administration, all businesses registered in Arkansas must comply with both federal and state tax regulations. Here are five business tax planning tips to help you get started:
- Select the Appropriate Form for Your Business
Business tax planning begins before a company is ever formed. It is imperative that taxpayers select the proper legal structure for your business. Different business structures are taxed in different ways. As an example, you may want to operate your company as a sole proprietorship, a pass-through entity, such as a partnership or an LLC. Alternatively, your Arkansas company may work better as a C-corporation. What form works best depends on the finances, the nature of your business operations and your long-term objectives.
- Make a Checklist of Business Taxes and Related Costs
To help with tax planning, it is useful to take a comprehensive inventory of exactly what the company might owe in a given year. Indeed, entrepreneurs and small business owners can benefit from creating a checklist as part of the tax planning strategies of all possible taxes. Among other things, this may include:
- Business income taxes;
- Arkansas state taxes;
- Local taxes;
- Employment taxes, including self-employment costs; and
- Business licensing and permitting fees.
With a detailed checklist of likely taxes and costs, you can get a better idea of what your company might owe to the Internal Revenue Service (IRS), State of Arkansas, or other government entities.
With Business Tax Planning, Timing Matters
One of the most important things that Arkansas business owners should know about tax planning is that timing is everything. Depending on the specific financial circumstances of your business, it may be a sensible strategy to defer revenue until the next tax year or accelerate expenses into this tax year. A tax professional can help you with tax preparation and to understand the benefits and drawbacks of deferring revenue and/or accelerating expenses.
Create a Plan for Getting Taxes Paid
Business taxes are a significant expense, and even more so if you suddenly find out that your company owes a lot of money. Arkansas businesses should create a thorough plan for satisfying their tax obligations. By doing so, they can better protect themselves from unwelcome surprise bills or major disruptions in tax flow. Be sure to estimate the amount of tax your company is going to need to pay over the course of a given year and put money aside, potentially even making estimated tax payments to the IRS.
Be Ready to Consult with an Attorney for Help
Tax planning is complicated. You do not want to leave money on the table—or worse, face sanctions or enforcement action—because of a relatively minor error. Professional guidance is available. If you have questions with business tax planning, tax forms, tax cuts, or need legal support, an experienced Arkansas tax attorney can help. If you want more information on this area of tax law, see our tax overview.