Starting a business in New Jersey, or simply restructuring a company, provides the opportunity to help to reduce both short and long-term business taxes. Working with CPA with experience in business setup and taxation in the state is highly recommended, ensuring the company can reduce taxes both for the current year as well as into the future.
Correct Business Type
For many business owners, entrepreneurs and startups, forming an LLC or Limited Liability Company offer significant tax and legal benefits. Within the LLC status, there is also the option to choose the “C” corporation designation, which has additional filing requirements but also offers significant tax advantages when companies have greater profits.
LLCs are ideal for single or sole proprietorships. The business income and all expenses “pass through” the company and are reported on a schedule C with the personal income tax return. LLCs with multiple members will require an EIN or Employer Identification Number and a partnership return, as well as a Form K-1, must be filed for every individual with an income or a loss reporting for the business.
It is possible for an LLC to also elect a Subchapter S designation within 75 days of the company formation or within the same 75 days for each tax year. This allows for the income from the company to be taxed at corporate rates rather than personal rates.
Deductions
It is possible for any LLC business type to have deductions. These deductions reduce the business taxes up to the allowable amount. Examples of these types of deductions for business taxes include charitable donations, health insurance payments, the expense for company vehicles, business insurance deductions and even deductions for the corporate office or home office space.
Talking to a CPA in New Jersey before setting up a company, or when there is an increase in income for an LLC, can help to lower taxes over the short and long term.
