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Tax planning for micro and small businesses: basic aspects to know

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Tax planning reduces costs for micro and small businesses. The tax burden can consume a company’s profitability. So, anyone who aims to reduce costs and increase profitability needs to opt for good planning to adopt legal strategies that reduce excess Small business taxes, simplify and improve the company’s financial / tax performance.

Is it possible to legally reduce taxes?

This is the big point of planning that many companies are unaware of. Legislation has multiple paths and it presents a solution to reduce the excess of taxes in a company. This means that tax planning is a measure entirely guided by the law. Another point that deserves to be clarified is that tax evasion or evasion has no connection with tax planning. Tax evasion and evasion as a way of reducing taxes are illegal measures and should not be practiced by companies.

What is tax planning for micro and small businesses?

Tax planning assesses legal forms so that the payment of taxes occurs less costly for the company.  To make this possible, it is analyzed what is the best tax regime to be used by that company. It is worth remembering that this choice can only be made when the business is opened, or at each turn of the fiscal year. The small and medium business should invest in planning as a way to improve the company’s financial health.

How is Tax Planning done?

The planning begins with an analysis of the regimes that exist in view of the characteristics of your company.  The activities carried out, the company’s profit and billing, number of employees, and all data from the last year of exercise are evaluated. After evaluating these aspects, the conditions are fitted in each regime to assess which regime will bring the greatest cost benefit to the business.

Collect information from the calculation bases

After defining the partner for the task, establish a schedule with a start and end date for preparing the plan, as well as for carrying out each of its stages. It is important to strictly follow the stipulated dates and ensure enough time so that everything is done well. After this, you will be asked to collect all the company information that is necessary to prepare the plan:

  • Billing or gross revenue – all earnings from business activities,
  • Purchases – all business acquisitions,
  • Services taken – contracting services,
  • Operating expenses – expenses necessary to maintain activities,
  • Profit margin – percentage of revenue earmarked for profits,
  • Investments – other company investments and the source of funds,
  • Corporate structure – information about the owners and partners of the company.

If you are not sure how to obtain this information, ask your accountant for guidance.