When you’re starting a business, one of the most valuable assets that you can have is a great lawyer. However, when a business owner is first getting started, it’s also quite helpful (and cost effective) to learn as much as possible about law and possibly to even obtain a bit of legal education.
Those with a background in law have an advantage because they can avoid fines and penalties, perform much of the legal paperwork themselves and take advantage of as many tax breaks as are legally available to them.
There are many laws that businesses will need to be familiar with, including zoning laws, licensing laws and trademark and patent laws. For example, there are restrictions on which businesses can be established in which areas. Most businesses also need to be very familiar with employment laws.
But one of the areas that would benefit small businesses the most are knowing the tax laws, and perhaps arming yourself with one of the many tax calculators available online. Tax laws influence how much taxes the company will have to pay and also allows the company to avoid paying large fees for improperly filing their business taxes.
The structure of the business plays a major role in the size of the tax bill that a business has to pay at the end of the year. There are four main types of taxes that businesses have to pay:
- Income tax
- Self-employment tax
- Taxes for employers
- Excise taxes.
How the entrepreneur reports these taxes is largely determined by the structure of the company. For example, sole proprietorships report their personal and business taxes on the same form while the owner of an LLC has separate forms for his business and personal taxes.
In addition to the potential tax deductions that business owners with legal background can receive, another major benefit of having a legal background is that the entrepreneur will understand the type of personal liability that the business needs to have, which is based on the typical risks that the type of business faces. While the lawyer may not be specialized in this area of law, having a general understanding of legal principles gives a business owner an advantage over competitors.
For those business owners who do not have a legal background, there are fortunately resources that are available. LexisNexis lawyer marketing is one of the most reputable resources for legal professionals who are interested in pursuing business opportunities and also has valuable resources for those who do not have a legal background.
The best time to start thinking about and legal needs taxes is yesterday. The second best time is now.
Disclaimer: I am not an attorney, and don’t play one on TV. I strongly recommend you consult an attorney before doing anything legal (or illegal). Actually, just don’t do anything illegal, ok? Thanks!