Tax Strategies for Business Owners

Pick the right entity from the start

A sole proprietor making $120K net pays self-employment tax on every dollar. An S-Corp owner at the same income pays payroll tax only on their "reasonable salary" and takes the rest as a distribution — often saving $8-12K per year in SE tax alone. Entity choice matters at different income levels and for different goals (liability, succession, retirement funding).

• LLC taxed as sole prop: simplest, but full SE tax on all profit
• LLC taxed as S-Corp: SE tax savings above ~$60-70K net income
• S-Corporation: same benefit as LLC-taxed-as-S-Corp but with more formalities
• C-Corporation: rare for small business; useful for retained earnings, fringe benefits, or future sale

Max out retirement contributions

Retirement contributions deduct against your business income AND grow tax-deferred. The right plan depends on how many employees you have and how much you want to contribute each year.

• Solo 401(k) — up to $70K/year (2026) for owner-only businesses
• SEP-IRA — simpler than 401(k), contribution limited to 25% of comp
• SIMPLE IRA — for businesses with employees, up to $16,500 employee + employer match
• Defined Benefit Plan — for high-earning older owners; contributions can exceed $200K/year

Don't miss the QBI deduction

The Qualified Business Income deduction lets many pass-through business owners deduct 20% of qualified business income directly off their taxable income. But the rules around specified service trades, W-2 wages, and income thresholds are complex. Most returns we review have either missed opportunities or incorrectly claimed QBI.

Strategic fringe benefits

Properly structured, fringe benefits can provide tax-free or tax-deferred value to you and your family while being fully deductible to the business.

• Accountable plans for expense reimbursement (tax-free to you, deductible to business)
• HSA contributions alongside a high-deductible health plan
• Section 125 cafeteria plans
• Health Reimbursement Arrangements (QSEHRA for <50 employees)
• Educational assistance programs

Section 179 + bonus depreciation

Purchased equipment, vehicles, or software for your business? You may be able to deduct the full cost in the year of purchase rather than depreciating it over 5-7 years. Timing of purchases can matter enormously when one tax year looks different from the next.

Year-end timing

If you're a cash-basis business (which most small businesses are), you control your taxable income by controlling WHEN you bill and WHEN you pay. Accelerating expenses in a high-income year, deferring expenses in a low-income year, accelerating invoicing when a rate increase is coming — these timing moves can save thousands per year with zero structural change.