Small Business Tax Strategies for 2022 to Strengthen Your Business

With the 2021 tax year filing season wrapping up this month, many small business owners and operators are ready to put Uncle Sam in the rearview for a while and focus on running their business as efficiently and profitably as they can.

While preparations for the 2022 tax year filing season may seem far off, there are steps that can be taken now and throughout the year that can be beneficial to a business’ revenue, growth investments and long-term tax strategies.

Here are a few ways you can strengthen your business’ financials, reinvest into its success and reap tax benefits simultaneously.

Review Your Small Business’ Structure
It’s important to periodically review your business structure not only for tax purposes, but to protect your business from any personal liabilities that may arise.

For example, if your sole proprietorship business has grown or expanded in its scope over the past year, but you are still the sole owner, it may make sense to separate your personal and business finances and responsibilities more by structuring your business as a Single-Member Limited Liability Company, or LLC.

A single-member LLC is the most popular structure for emerging small businesses that want more legal protections and separation from personal credit and assets. Your local Small Business Development Center or tax advisor are great resources for advice.

The IRS website also lists different types of business structures, including a sole proprietorship, partnership, corporation, S corporation and Limited Liability Company (LLC).

Buy or Upgrade Equipment
Whether your business could use a new pizza oven, printing press, medical devices, computer systems or other equipment necessary for your industry, investing in these items to keep pace with customer needs, and your competitors, is a wise move.

There are many options to finance these purchases, whether through a small business loan, U.S. Small Business Administration (SBA) funding or equipment financing.

Whichever equipment financing option you choose, you could save money by writing off the interest on the loan in each tax year that the loan is being paid back. Make sure you keep accurate records and talk to your bank and tax advisor to help determine which funding options are best for you and your small business.

Invest in Real Estate
Is your small business ready for a new home? Owning the space where your business operates provides many extra incentives, such as building equity. One of these perks is deducting annual interest paid on a small business real estate loan, which helps infuse cash back into your business while also generating revenue though renting extra space to tenants. Just make sure your business uses at least 51% of the space.

And while you are paying down the loan, you could also be building equity and financial strength for your business.

Finally, if you already own the property, refinancing can free up capital to make improvements, expand your space or cover other expenses that can improve your business’ finances.

As we’ve seen the past couple years, having as much financial strength, flexibility and revenue streams as possible is critical to long-term, sustained growth and success.