Enjoying Your Retirement

Posted on: 13 December 2019

It should be understood that, as a citizen of this country, you should always pay your taxes. However, if paying your taxes on your business is likely to bankrupt you next year, there are a few things you can do to either lessen your tax burden or skip paying taxes on the business. Here are your solutions. 

Donate Thousands of Dollars to Charity

Not every business is lucrative enough or profitable enough to donate tens of thousands of dollars. If your business has done that well this year and you have access to those profits, it behooves you to donate as much as you can prior to the last day of this year. The thousands you donate to charities can help offset your tax responsibility, and if you are really lucky, the donations will cancel out your tax debt on the business entirely. Just be aware that if you are in this position again next year, you would have to repeat the charitable giving to cover most or all of the tax responsibility for each tax year. 

Transfer Your Business to a Family Member

You can transfer the entire business to a family member with the understanding that the tax responsibility becomes theirs. If the family member is willing to pick up the proverbial torch, operate the business as his or her own, and accept responsibility for the taxes that need to be paid at tax time, then you do not have to pay the taxes. Often this is done in lieu of selling the business to a family member because the taxes paid are equal to less than the cost of buying the business. It ends up being a good deal for you and a good deal for the family member that gets the business from you as a transfer of ownership.

Sell the Business Early in the Year to Avoid Paying Taxes Next Year

You will still have to pay taxes on the business for the year ending on the 31st of December of the previous year, but if you sell the business within the first week of the new year, you will not have to pay taxes on the business next year. The longer you wait to sell the business in the new year, the more likely you are to incur some of the responsibility of the tax debt. The object is to sell early to pay less or pay nothing at all. 

To learn more about selling businesses and how to minimize taxes, contact a resource near you.