Proper Tax Planning Vital for New Businesses

Emerging businesses must ensure that their operating methods do not result in tax inefficiencies by structuring specific transactions to obtain maximum tax benefits. The objective of CPA Tax Planning is to minimize the impact of tax in respect of business transactions. Another objective of tax planning is to achieve a high degree of predictability of the size and timing of tax payments. This can be achieved if one is well acquainted with the process to go about when planning for the payments.

At the start a businessman must identify the process involving the identification of alternatives to achieve the same economic result so as to minimize the tax rates.

Furthermore, he emphasized the difference between tax avoidance and tax evasion. While the former is a mean of minimizing one’s tax rates, the latter is regarded as a crime.

In addition the timing of implementing the tax planning exercise should be done throughout the business; but most importantly, at the commencement.

The implementation is to be exercised in a number of occasions which normally occur in a business such as acquisitions of major assets, diversification or expansion of existing business.

The basic techniques of tax planning involve, among others, ensuring that the incidence of tax falls on a person where the impact is the least.

This can be done by transferring passive investments to family members who are currently taxed at low rates or not taxed at all.

To develop an effective tax plan, understanding of the objectives of a business transaction is paramount.