What Does Tax Planning for Small Business Owners Look Like?

Many think that effective tax planning for small business owners revolves simply around meeting deadlines – but that isn’t enough. It’s about leveraging every opportunity to reduce liabilities, preserve your hard-earned income, and contribute to sustainable business growth. Here’s what diligent tax planning should encompass according to financial services firm Matthew S. Abrams – from corporate structure evaluations to personalized income management strategies and more.

Review Corporate Structure and Tax Status

The first step in tax planning involves evaluating your business’s corporate structure and tax status. Your choice between forming an LLC, S Corp, C Corp, or maintaining sole proprietorship status is essential in determining your tax obligations. For instance, LLCs and S Corporations allow profits to pass through to the owner’s personal income tax, avoiding double taxation, while C Corporations could benefit from the lower federal corporate tax rate but may face double taxation on dividends.

The right choice largely depends on how you intend to scale your business, what kind of deductions or incentives you’re looking to tap into, and your long-term tax planning goals. Regular reassessment of your business structure ensures that it is still the best fit as your company grows and your income profile shifts. Your CPA can help determine if a change in your corporate structure will reduce your current tax burdens.

Review Retirement Plan Options

Small business owners often overlook retirement plans as a tax-saving tool. However, contributing to a retirement plan can significantly reduce taxable income. Whether you opt for a SEP IRA, SIMPLE IRA, or a self-employed 401(k), choosing the right retirement plan can ensure both you and your employees enjoy solid retirement savings alongside meaningful tax savings.

Each retirement plan option offers different benefits for deduction and contribution limits. The maximum contributions allowed under certain plans could make a noticeable difference in your tax calculation. Aligning your retirement planning with your overall tax strategy can help you set aside pre-tax dollars and reduce taxable profits. Additionally, programs like defined benefit plans or profit-sharing plans can allow sizable contributions, ideal for small businesses looking for large tax deductions.

Consider Income Deferral or Acceleration

Income timing strategies—such as income deferral or acceleration—are vital for effective tax planning. Deferring income to a future tax year, particularly when your business anticipates lower profits, can push taxable income into a period with lower tax liabilities. On the other hand, accelerating income might be wise if you foresee higher profit and tax rates in the coming years.

Both income deferral and acceleration require careful assessment of your cash flow projections. Timing is critical, and the decision to push income into the future or bring it forward should be well-coordinated with other tax planning tactics. Consulting with your CPA on your business’s earnings projections and how economic or regulatory environments might shift helps tailor your approach to match your financial goals.

Further Guidance for Tax Planning with a CPA


Tax planning for small business owners is a multifaceted process that demands professional input for optimal results. With the right CPA offering tax preparation services for small businesses, you can think beyond end-of-year filings and instead tackle holistic strategies that drive down tax liabilities year-round. Our firm provides valuable insights into areas like corporate structure, income deferral, and retirement plan options, all to ensure you pay only what you need to.

Matthew S. Abrams is here to alleviate your tax concerns through an individualized approach backed by decades of experience. Let us guide your tax strategy and get ahead of your liabilities so you can focus on growing your business. Contact us today to ensure you have an expert partner in your corner who knows all the ins and outs about tax planning for small business owners and beyond!