It’s an exciting time to be a San Antonio entrepreneur—new and seasoned alike. As businesses in San Antonio flourish, it’s essential not just to grow and thrive but to protect and preserve with smart tax-saving moves.
San Antonio’s startup scene is booming, with tech jobs in the area expanding by 80% in the past year. The city’s primary industries—including healthcare and bioscience, aerospace, IT and cybersecurity, and renewable energy—are fueling success in their niches and for other businesses in the community. How do they do it? In part, by reducing taxes however they can. Whatever stage your business is at, whatever sector you’re in, your tax bill could also benefit from certain startup-friendly moves regarding your business structure, funding, payroll, and more.
Should you be an LLC? Corporation? S-Corp? Partnership? That decision can affect taxes as well as your legal liabilities and obligations. But what if you chose your structure years ago? Chances are that you’ll want to restructure as time passes, so don’t just “set it and forget it.” Restructuring as needed for family succession, exit planning, acquisitions, partnerships, changes in offerings or processes, and other milestones is vital to keep taxes as low as possible.
Look at ways to “share”
Early-stage startups will routinely offer equity (stock options, warrants or grants) to new employees as part of their compensation packages. Employee shares allow these businesses to conserve cash while attracting talent willing to invest in long-term success. But you don’t have to be a startup to consider sharing ownership of your business for these reasons. San Antonio electrical contactor Alterman, Inc. is an example of a long-established business that recently moved to an employee-ownership model with an Employee Stock Ownership Plan (ESOP). There are several ways to offer shares (including being a sole shareholder in an S-Corp), each with specific financial and tax benefits.
Successful startups have spotless and efficient books because investors often request outside audits at certain stages of growth. It’s a practice that all small businesses could benefit from. Payroll messiness, in particular, is a top reason many small businesses get in trouble with the IRS. Payroll fraud and willfully neglecting to pay payroll taxes can, of course, lead to trouble. But many business owners can also bury themselves in mounting tax debt (double what they initially owed) due to mistakes, oversights, or falling behind on payroll obligations.
Maximize deductions and offset losses
For most small businesses, working with a CPA can pay for itself purely due to the number of deductions and losses these professionals can help discover. Dozens of small deductions can add up, and there are potentially substantial tax-saving areas for businesses, including Section 179, research and development, property improvement, and business losses. Timing is everything for some strategies—like net operating loss carrybacks, income deferral, or accelerated depreciation—so advanced planning is critical.
Know your niche
There is no one-size-fits-all tax strategy. One reason tax planning can be so complicated is the different areas to keep an eye on; many are ever-changing. For instance, many startups and small businesses in San Antonio are government contractors. There are specific tax and accounting rules to keep in mind in those roles. As another example, if you sell or make goods—or keep an inventory or order supplies as part of your services—it’s important to understand sales tax nexus and inventory tax rules.
A growth mindset isn’t reserved for startups wanting to take over the world. It’s about committing to continuous learning. Regularly acquiring new tax planning strategies is a great way to turn that mindset into cost savings. Feel free to contact us with questions.