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Understanding Small Business Taxation in Daytona Beach, FL: A Legal Perspective

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What Taxes Must I Pay?

As with anyone looking into starting a new business or opening doors to your business for the first time, you may be wondering what tax implications will arise. One of the most appealing characteristics for small business owners in Florida is that they get to avoid more taxes than in most states.

Florida doesn’t require small business owners to pay state income taxes unless they are structured as a C Corporation. With most small businesses, at least in the beginning stages, their company is structured as an LLC, an S Corp, sole proprietorship, or otherwise, which can mean that they see less taxes while they grow their business.

Furthermore, business owners in Florida are typically not taxed on income from their small business that they pay themselves.

What is an LLC?

A Limited Liability Company, or LLC, is a business structure that each state allows for small business owners. Business owners under an LLC are called members, and though a person can be a member, so can a corporation, other LLCs, and more, with no maximum number of members.

An LLC provides business owners with certain protections for their personal assets. Protection and minimal tax implications make creating an LLC an excellent small step that all small business owners can make.

As an LLC, state income taxes are generally not applied; therefore, owners only need to worry about taxes at the federal level. Exemptions allowed for small business owners can typically keep applicable taxes low and manageable.

S Corporations

Structuring your business as an S Corporation is appealing to many. One of the main reasons is that it allows business owners similar protections as a C Corp, but with far fewer tax implications. Business owners with an S Corporation structure are generally shielded from state income taxes and taxes on the income they pay themselves through the business.

It’s important to note, however, that business owners with an S Corp designation will be subject to paying income tax at the federal level on the income from their business.

Sole Proprietorship

One of the most common business structures for entrepreneurs is a sole proprietorship. According to the Florida Department of State, a sole proprietorship is “an unincorporated business owned and operated by one individual with no distinction between the business and the owner.”

Business owners with sole proprietorship designations are also exempt from paying state income tax in Florida. However, federal income taxes will apply, so working with your business attorney or accountant is essential to ensure compliance.

Tax Planning is Imperative

While most business owners don’t think much about taxes until it’s time to meet with the accountant, a clearly defined approach throughout the year can make a huge difference for all business owners when it comes to tax time.

What deductions will you take? How will you plan for them throughout the year? For example, business owners can write off things such as meal expenses if they discuss or secure business during lunch. If a business owner wants to take a potential client, distributor, or manufacturer out to lunch, they can typically write off part or all of this lunch.

Similar tax planning can include your vehicle if you use it for business, like conducting meetings away from your office or visiting clients. You may be able to write off gas expenses and maintenance to your vehicle throughout the year.

Deductions are an excellent way to help mitigate the amount of taxes necessary throughout the year, and by working with an experienced business attorney or accountant, you can ensure that you are maximizing your deductions for the best outcome.

Home Office Deductions

One of the most beneficial deductions that small business owners find helpful is the home office deduction. If you are working out of your home rather than primarily in a commercial space, you can write off expenses related to your home office.

You can provide documentation of the use of your home office through daily logs of activity, whether it’s a client visiting your home office, you conducting business, and more. You can likely write off expenses such as your internet, phone, business equipment such as a computer, printer, or necessary software.

Capitalizing on these and other business expenses can significantly impact small business owners’ taxes, increasing their bottom line and promoting growth.

Your Partner with Purpose

As an experienced business attorney, I primarily help small businesses with all of their legal needs. While it’s just me providing services rather than a team and giving you the personal attention your legal matters deserve, my services typically focus on becoming a long-term business partner with my clients.

From determining the appropriate structure for their business, filing the proper paperwork to remain compliant, structuring contracts as necessary, and more, I work with my clients with large or small businesses from day one and throughout the life of their business.

By appropriately planning ahead, you can help avoid some of the common pitfalls of small businesses, whether with taxes, business structure, or asset protection.

Small business owners are vulnerable to many issues, including protecting their trade secrets or intellectual property, liabilities, and incorrect tax planning. Avoiding these common errors can help streamline the productivity and growth of your small business and promptly bring you closer to your goals of being a successful business owner.

Contact our office online or call us today at (850) 888-8992 to schedule your consultation and learn more about how I can best assist you as an invaluable partner for your business.

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