A tax strategy is more than just wishing you could pay fewer taxes. A tax strategy ensures you pay the least amount of tax allowable by law, regardless of your business or investment situation.
I'm often asked what is involved in creating a tax strategy. When it comes down to it, there are 3 steps to creating a tax strategy
Step 1: Your Wealth Vision
Begin by identifying your personal and financial goals and dreams. I call this ‘Your Wealth Vision.'
Where you want to go has a significant impact on how your tax strategy looks today and how it will grow with you.
A successful tax strategy takes into account your goals for your business, your investments and your family. Never create a tax strategy that does not fit within these goals.
Step 2: Entity Structure
Review how your businesses and investments are currently held. Then, determine how they should be held – both now and in the future.
Should you change the type of entity (or entities) you currently have? Should you add entities to take advantage of tax savings available to certain entities?
As you are creating your entity structure, keep this in mind:
Your entity structure must be flexible because your entity structure will serve as the basis for tax savings for the rest of your life.
Step 3: Deductions
Are there expenses you are paying personally, that, if properly structured and documented, could be paid by your business or investment activities?
If you have such expenses, you’ve just found permanent tax savings! Your tax strategy should identify the deductions, how to document them and who (you or your business or your investments) should pay them.
Keep It Going
As you move forward with implementing and executing your tax strategy, you'll discover that your tax strategy is constantly evolving. This makes it important to continually monitor your tax strategy to make sure it is still serving its purpose to ensure you pay the least amount of tax allowable by law, regardless of your business or investment situation.
