Key takeaways on why every small business should work with a tax attorney:
1. Expert Guidance: A tax attorney provides specialized knowledge in tax law, ensuring that small businesses comply with complex tax regulations and avoid costly legal mistakes.
2. Financial Savings: By leveraging their expertise in tax planning and strategies, tax attorneys can help small businesses minimize their tax liabilities and maximize potential tax benefits.
3. Legal Representation: In cases of audits, disputes, or litigation with tax authorities, a tax attorney represents and defends the interests of the business, offering crucial legal support and advice.
Many people who open a small business don’t think about hiring a business tax attorney. You may think you don’t need one or that you just need an accountant during tax season, but hiring a business tax attorney is one of the wisest things you can do for yourself and your business. A small business tax attorney who is with you every step of the way, from business creation and beyond, can help you with the countless forms and required documents needed for legal incorporation. An attorney can also help you trademark your name or protect your newly created business assets, plus handle your lease negotiation agreement.
There is no such thing as a legal document one-stop shop for opening a small business. Not all small businesses need the same forms or documents; each one is different, based on its respective service or product and the founder’s goals.
Working with an experienced tax group is a wise choice if you are starting a small business or want to grow the one you have. This guide will walk you through all the benefits of hiring a small-business tax attorney and frequently asked questions about doing so.
What Do Small-Business Tax Lawyers Do?
A tax lawyer helps clients with tax planning and tax representation. One of the most challenging parts of being a small-business owner is defending themselves against tax-related litigation, which could often be avoided if they would use tax lawyers from the start. Here are a few things to keep in mind:
- Small-business owners have a lot on their minds when getting started. They want to concentrate on growing the company and following their passion, yet many are not knowledgeable in bookkeeping and tax obligations.
- Bookkeeping and taxes are not something business owners can learn as they go along, and the IRS pays close attention. They will be checking on your accounts and taxes as soon as they can.
- One of the biggest reasons small businesses need a good tax lawyer (or tax group) is to help determine what taxes they will owe and assist them with general tax planning and following all tax guidelines. There is no getting around having someone who understands the legal and tax structure. That is why it is essential to have a business tax attorney at your side when your business is created or grows.
- You need the security of having the best legal representation not only to help guide you while you are setting up your business but also to provide the business framework that helps you schedule your tax reports, payments, and any special filings needed.
- Business tax attorneys understand the nuances of tax law and can provide the expertise you need in the complicated and ever-changing world of taxation. They will help you lessen your tax obligation with the appropriate legal structure for your small business.
Perhaps a business tax attorney’s most important duty is to represent you in any tax issues that may arise. The first step, however, is understanding how necessary legal help is and reaching out to the right attorney.
Why Small Businesses Need a Good Tax Lawyer
Small companies set up their taxes according to their business structure. They must understand what type of taxes they will need to pay to avoid potential tax issues and when they need to pay their business taxes under the law, which can vary based on the type of business entity. They also must be aware of how much they will need to pay each year.
Their obligations will vary based on what type of business structure is created, including:
- Limited liability company (LLC)
- Sole proprietorship
- Partnership
- Cooperative
- Corporation (including C Corps, S Corps, B Corps, Closed Corps, and Nonprofit Corps
Some business owners must pay quarterly taxes, for example, and some have to pay an extra corporate tax, which is covered more in the next section. A business tax lawyer understands which is which and can advise you on what entity type is best and sift through all your requirements.
Business Structure Tax Obligations
Small-business taxes are difficult to understand from just reading about them on paper. Most businesses would be wise never to try to figure out their tax obligations without a good tax lawyer by their side. If you pay the wrong amount or pay at the wrong time, you can end up in an IRS hole with tax issues such as significant penalties and fees.
Your small-business taxes in payroll, federal, or state obligations depend on the business’s structure. Here are the basics about how the different structures are taxed:
Sole Proprietorships
A sole proprietorship is owned and operated by one person. The business is not separate from the individual, and all income is reported on their personal tax return. They have to pay self-employment tax but not business tax.
LLCs
All profit is still considered personal income if you set up your business as an LLC, but you have an extra layer of liability protection and separation from the company.
Partnerships
A partnership also allows you to claim your share of the profits as personal income. Your attorney may ask you to consider setting up a quarterly advanced tax payment system to comply with all tax laws.
Corporations
Corporations require you to pay taxes on profits after your expenses are deducted. This includes payroll considerations for your employees. You need to pay your personal taxes, including FICA, all year long if you pay yourself. Entities that decide to convert from a C corporation to an S corporation become pass-through businesses but retain some benefits of running a corporation.
Pass-through entities such as sole proprietorships and partnerships can benefit from avoiding the corporate tax, but they have to pay self-employment taxes. There are pros and cons to each structure. A tax attorney will advise which structure to choose according to your goals and current needs for your business.
General Business Services Provided by Tax Attorneys
New business owners will have a lot on their plates and will be rushing to get everything done. Their attention will be on setting up many other aspects of the business in addition to their tax plan. These may include the following:
- Cash flow management
- Line-item business budget with a contingency or unforeseen-expense line item
- Payroll expenses, management, and system
- Reconciliation of books
- 1099 management
- Selecting vendors
- Financial analysis
- Tax planning & business growth
- And much more
An owner of a new or growing business will have an unending list of job tasks to create and update on a day-to-day basis. Tax attorneys help businesses with a range of these tasks and related issues that may come up during the process. They stay up to date on new IRS regulations and changes to existing laws to help you create your plan.
A business tax lawyer can help if a company needs something researched discreetly. They assist clients in establishing and growing their business so there is no stress or anxiety when Tax Day rolls around. Ensure your small business is well insulated from tax issues, surprises, or tax litigation. Get back more of your time to improve your business and stay competitive.
Communicating With the IRS
IRS agents may be the last people you want to talk to, but you will need to stay in touch with them throughout the process of tax repayment. This is a crucial part of normal business operations. Never ignore the IRS, because things can get ugly fast if an agent feels that you’re attempting to avoid speaking with them or repaying your debt. A few other facts to know:
- Penalties and interest charges can be just the beginning. You could end up losing your business because of tax issues if you’re not careful.
- Penalties and interest payments don’t remain fixed, either. The longer you delay paying, the higher they’ll increase, and the more tax issues you will have on your hands.
- Most tax debts compound at a rate of 14% or more.
- The IRS also has a whole arsenal available for collecting back taxes.
- They can seize just about anything in your possession, including your bank account, your wages, and even your home.
- Never assume that they need judgment or a court order before proceedings begin.
- They can grab your property or close your business at a moment’s notice.
You may receive no other warning beyond a demand letter. They can effectively close your business in short order by seizing your assets and padlocking your door. Assets could include everything from desks to inventory and even business accounts. These risks are not small, but a tax attorney can help you protect your business from these nightmares.
FAQs About Business Tax Lawyers
Small-business owners have built their companies from the ground up. A top priority should be protecting that business from any tax-related issue so it can continue to grow. Hiring a tax attorney is a good idea for that reason alone.
You may still have questions about other benefits and next steps. Here are a few commonly asked questions about working with a business tax attorney:
What Kinds of Taxes Do Attorneys Help With?
Small businesses deal with many moving parts related to taxes. An attorney can help you sort through local, state, and federal tax obligations, in addition to corporate taxes, estimated taxes, payroll taxes, and other employment-related taxes, as needed.
Can a Business Attorney Help With Deductions?
Small-business attorneys help clients by identifying credits and tax deductions they may not be aware of. This is often how attorneys can help you minimize the amount of taxes you have to pay each year. You also must be sure you are only claiming tax breaks that apply to you.
When Should I Hire a Business Tax Lawyer?
Any small business should work with a tax attorney to set up a solid strategy. A few scenarios should elevate working with a lawyer to a high priority, including if you’re just starting a business, if you conduct any business internationally, or if you are dealing with an IRS audit or dispute.
What Kind of Experience Should My Attorney Have?
You should be sure that they have experience working with small businesses similar to yours. A company just starting out should ask the attorney if they’ve helped get businesses off the ground. It’s also a good idea to determine how their process works and who their target clients are. Ask for references or testimonials to contact other past clients for extra reassurance.
How Are Business Lawyers and Tax Lawyers Different?
Some attorneys assist small businesses with a range of services related to their startup, including taxes, while other attorneys focus solely on taxation. Think about whether you want your attorney to provide all business services you need or if you just need help with tax planning or representation with the IRS. Ensure the attorney you hire provides every service you require when you consult with them.
How Do Business Tax Attorneys Help With an IRS Issue?
They can help you manage any IRS issue you may have. They can represent you in court, ensuring that someone is fighting for your interests. They can also help you comply with IRS audits, which can be tricky and complicated. Attorneys understand the laws so you don’t have to. They allow you to get through the process with an eye on your desired outcome.
Where Do I Get Help With Tax Debt?
An attorney can help you if you or your business has a lot of tax debt. You may need someone to step in and help you get your payments paused or set up a better payment plan that works for your budget. An attorney can tackle these tasks and help negotiate with the IRS to minimize your debt in some cases.
Tax issues have a significant impact on the success of any small business. That is why you should consider working with a tax attorney as soon as you start to build your business.
You will have all the tools you need to stay on top of taxes each year and avoid issues with the IRS. Always make sure you find a tax attorney who you feel comfortable working with and who has experience handling your specific problem.
Contact a Tax Professional With Business Tax Questions
Our experienced tax attorneys stay busy with the day-to-day tasks that would otherwise be bogging down our business clients. We may be involved on any given day in analyzing taxpayer invoices, summary sheets, and bank statements for our clients. Sometimes we arrange and review oral statements. Our group spends significant time researching relevant tax laws and authoritative sources, and negotiates with the IRS for our business owners as well as deals with our business owner’s estate planning, tax planning, new partnership agreements, transactional taxes, and ongoing IRS tax issues.
Silver Tax Group is an esteemed business tax group that offers you a mapped strategy for your business tax planning and corporate structure needs. We provide this service for our clients along with various other practice areas. Hiring us allows you to concentrate on what you have waited for your whole life: setting up your business for long-term success. Reach out to Silver Tax Group with questions about small-business taxes. We are here to guide you through these complex issues, whatever your problem may be.
