The way you organize your business can have important tax implications. One structure may keep the tax bill low for some types of businesses, but are not the best strategy for others.
One thing virtually every Ohio business owner has in common is a desire to pay as little in income taxes as possible. That is why many small business owners are closely following efforts in the Legislature to reform the two-year budget. A section of the budget that WOSU-FM implies was poorly written could inadvertently raise taxes on some businesses.
Currently, the budget would allow small business owners to deduct up to 75 percent of the first $250,000 of their business income for 2015, and pay a 3 percent flat tax on the rest of the business’ net income. In 2016, all of the business’ first $250,000 of income will be deductible, with the remaining net income taxed at 3 percent.
WOSU says this would result in a higher 2015 tax rate than for 2016 for some business. Lawmakers said they did not intend for this to happen. A new bill clarifying the Legislature’s intent, which apparently was for the flat tax to apply only to income over $250,000, is being finalized, according to Bob Peterson, the chairman of the Senate Ways and Means Committee.
Businesses may have some influence of the political process, but ultimately you may not be able to control changes to tax law. But business owners can plan ahead by setting up their business using the best possible structure for them. A business attorney can help determine what that type of organization will be.