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Aug 26

The Best Tax Shelter is Still Owning Your Own Business

Owning your own business means   that you make all the major de-cisions,  including  the  ones  that  can have a real impact on your taxes.One of the earliest and most  impor-tant decisions you’ll make is to choose the  legal  form your business should adopt. The most common forms are a  sole proprietorship,  a partnership, or  a  corporation.  Each  has  different tax  consequences  and  making  the right choice can have a verry positive effect on your tax picture. Sole Proprietorships A sole proprietor is an unincorporat-ed business that has only one owner. It is a simple legal entity in which you are your own master.A sole proprietorship has three major tax advantages:You can deduct any losses you incur from  your  business  start  up  costs on your personal income tax return. These start up costs can be used to reduce  your  taxable  income  from other sources.You avoid double taxation. Income generated from a regular corporation is taxed twice. First, your busi-ness pays a  corporate  income  tax on its profits. And then, as a share-holder,  you  pay  personal  income taxes on any dividends you receive from the corporation. On the other hand,  income  from  a  sole  propri-etorship is taxed only once - as in-come on your personal income tax return.Your overall tax burden may be less depending  upon  the  tax  bracket you are in. Partnerships A partnership is similar to a sole pro-prietorship ... read more →
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