Taxes are confusing for the normal non-business person as it is.  When you add a business into the mix, with earnings, expenses, depreciations, retained earnings, etc, it really becomes a headache.  Collected sales taxes, inventory taxes, importation taxes, income taxes, the list goes on and on.

Your business entity, whether you are acting as a sole proprietor, under a partnership, a C corporation, a S corporation, LLC, or a LLP also determines when and how you pay your taxes.  Entire books are written on these individual entities and taxation, so we will not go into it here.  Don’t go out and buy a book about taxes.  Your best bet is to get someone else, someone competent, to do them, say H&R Block, TurboTax, or hire a CPA; the cost is tax deductible.

When you have income from your business, unless it’s defined in black and white as to what amount is for taxes such as sales tax collected when you sell a product or service, you can either just record the income and take your chances at the end of the business or calandar year and write a check, or you can be creative.  When I say creative, I don’t mean creative as in cooking the books, I mean make use of that money.  Set some time to get with an accountant and get a conservative estimate for your tax rate on income.  How much on the dollar will you have to pay in taxes, in general?  Say it’s 25% of all income goes out in taxes.  Take out 25% of all your income as it is created and invest the income in a liquid, safe investment vehicle, such as a 6 month CD or a money market account. 

You still have to pay taxes, but why let that cash sit and do nothing?  Use it to create more income.  The only problem, not so much a problem as it’s a snag, is that you are also taxed in interest income.  Still, any interest income is good interest income.

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