Small business owners in Connecticut have a lot of obligations—from keeping up with inventory to balancing big-picture strategy. From a long-term strategy standpoint, small businesses need to be aware of issues that could make or break the company. These concerns will affect a company for years to come, so it is essential to give some real thought to each of these issues and make informed decisions.
1. Properly Choosing the Right Entity
Most small business owners initially form as a sole proprietorship or partnership. This is because developing this business type may not require any legal action or knowledge. It is certainly cheaper, but it actually rarely makes sense from a tax, legal, or liability standpoint.
Instead, you should explore other entity options, including limited liability companies and corporations for your company. Taking the time to make the right decisions in this area can save you thousands of dollars in taxes and other costs over time, and you can avoid a lot of legal headaches. The decision on what entity to use for your business can be complicated based on the nature of your business. Talking with an accountant can help reveal your best option.
2. Determining How Many Owners Should be Involved
Your business entity type will often dictate how people should be owners or members, but it does not necessarily determine how many people you should involve. Giving others ownership and control is a big decision for a small business.
If you have too many owners, you run the risk of having too many people who have input in the company. If there are too few owners, then you may have problems running yourself too thin or not having liability spread out properly. Talking with existing business owners to learn about how they made their decisions or with your business advisors – your accountant, attorney, banker, to name a few – can help you determine what makes sense for your situation.
3. Succession Planning
You are not always going to be available or willing to run your business by yourself. The other owners may have the same thought process as well. After you get up and running, one of your long-term planning items should address succession planning.
Succession planning sets out how your company will transition to someone else. For some, especially family-owned companies, that means moving the company from you to another family member(s). For other businesses, that means having a long-term sales goal for the company. Either way, you should put some thought into what retirement or moving on from your business may look like.
In many cases, how you want to step away from your business will also influence which entity type you will use, as well. For example, it is much easier to sell shares in a company than transitioning a sole proprietorship.
Though it may sound like something of a broken record, involving your trained and trusted advisors – an accountant, business attorney, and possibly your banker – to talk through the complicated and, sometimes, personally difficult decision on what you want for your business is an excellent way to have a well-organized success plan.
4. Tax Planning
Small businesses should take full advantage of all tax deductions and credits that are available to you. However, doing that takes some advance planning. Working with your tax professional can be a great help. Consider items such as:
• Taking full advantage of charitable contributions
• Claiming the healthcare tax credit
• Deducting specific property
• Depreciating property and equipment appropriately
• Using work opportunity tax credits
• Claiming credit for childcare services if offered
• Deducting healthcare premiums
You can even plan your benefit offerings and other services around the potential tax advantages. In some situations, benefits and other employee services can actually be a more cost-effective option once you figure in the tax advantages.
5. Equipment and Expansion Planning
As you develop and grow your business, you may want to purchase additional equipment or expand. Planning for this type of development will not only help you grow, but it will also help you strategize how your growth can be cost-effective and efficient.
Long-term planning is an excellent idea for your business as a whole, but thinking about these items in terms of nitty-gritty dollars and cents will help at tax time as well. Make time for these discussions and planning so that you can take the proper steps without feeling rushed or missing an opportunity.
Getting Help with Your Long-Term Planning and Decision-Making
Having professionals on your side who know what kind of financial impact your business decision-making will have on your company can be a huge help.
Call either of our offices in Meriden (203-634-7549) or Madison (203-318-1488) or fill out our contact form to schedule a time to talk through the ideas you have for your company. We can help you decide what money-moves make the most sense for your situation from a tax perspective.