5 common tax approaches for entrepreneurs seeking growth

Early review of tax matters and government incentives can help improve outcomes as the business grows.

In brief

• Early attention to tax can become part of an entrepreneur’s holistic business plan.
• New incentives are available from state and federal governments for green investment.

While entrepreneurs understand the importance of tax as a business obligation, many don’t realize that it can become part of their holistic strategy — especially when tax is part of their business planning early on.

At any stage of the entrepreneurial business, attention to tax is sound advice. Whether a company is looking to expand operations or restructure, tax considerations and look-backs provide useful information and can save you money in the end. Developing an understanding of how tax matters impact the business can also put owners in a position to respond more effectively to regulatory matters or to sell the business.

Here are five common approaches of entrepreneurs looking to integrate tax as part of their holistic business strategy and to leverage tax as an asset while driving business growth.

2. Understand recent tax law changes.

Many entrepreneurs are not aware of the incentives available through the Tax Cuts and Jobs Act, CARES Act or Inflation Reduction Act (IRA). The IRA, for instance, offers incentives for energy-efficient upgrades and green technology, including manufacturing green products, using eco-friendly products and solar panels, or installing charging stations. Routine capital expenditures may also be eligible. “New motors on your assembly line? Those are probably more energy-efficient, and there could be something there,” Korte says.

3. Tax needs a seat at the table.

Kimberly Kicklighter, Private Client Services Managing Director with Ernst & Young LLP, notes that the single biggest thing entrepreneurs can do is gather all advisors to discuss the strategic business plan. “Your attorneys, your wealth advisors and your tax people should all be in sync, making sure they’re doing the best for the business.”

All strategic business planning has a tax component, adds Andy Park, EY Greater Los Angeles Managing Partner, Ernst & Young LLP. “Tax decisions are complicated and must be integrated with other business matters.  You can’t drive it by tax minimization,” Park says. “It has to have a business purpose. That’s why tax needs a seat at the table, to understand what the business is doing.”

4. Negotiate tax incentives to improve benefits. 

States and municipalities want business growth. Use that as part of your tax approach.  Many companies avoid making a business growth or expansion announcement or signing a lease before considering tax, says Park.  Consider hiring an advisor to talk to the jurisdiction about the tax incentives, including discretionary incentives that can be negotiated, as well as any statutory incentives you automatically qualify for.  

5. Conduct a comprehensive tax review.  

Kicklighter suggests that business owners ask their current provider or another firm to perform a tax review. Some businesses have received basic tax return services for years and then discover that their providers and advisors may have overlooked opportunities or obligations. In many cases, companies can file an amended returns or voluntary disclosure agreements dating back several years and reduce the exposure if there was oversight.

Knowing your tax history is especially important before bringing on investors, Kicklighter adds. Sales tax and other indirect taxes are often deal killers. “If you don’t know what’s there, it’s going to cost you money in a deal,” she says.