Q: What is the biggest mistake entrepreneurs make when it comes to taxes?
A: Often entrepreneurs make their biggest tax mistakes before they are even up and running by overcomplicating their initial business setup.
And unfortunately, once entrepreneurs fall into this trap, they can get stuck in for a long time.
But it doesn’t have to be this way. Here are a few mistakes entrepreneurs make and how to overcome these obstacles.
1. Too focused on structure and the best place to incorporate
Entrepreneurs tend to get obsessed with decisions like “What state should I incorporate in?” “Should I incorporate offshore or in the US?” and “How should I structure my business?”
Unless your business is kicking off with more money than you know what to do with and your shareholders are demanding that you “optimize your tax structure,” then follow the old KISS protocol: “Keep It Simple Stupid.” Use an LLC to limit your personal liability, keep your set up costs low and use a jurisdiction you either know a lot about (e.g. your home country) or where you can easily figure out the rules and find help when you need it.
After the structure and location is decided, the entrepreneur can reinvest all his extra time, energy and money into building his business and perfecting his product or service. And as your business grows, there will be plenty of time to change the structure if you need to, and it makes good business and financial sense!
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