The Power of Proactive Planning in the Twin Cities

October marks Women in Business Month—a perfect time to celebrate the entrepreneurial spirit driving the Minnesota economy! As a woman small business owner in the Twin Cities or Rochester, MN, you wear many hats. Tax planning, however, is one hat that often gets put aside until it’s too late.

Proactive tax strategy isn’t just about filing forms; it’s about making smart decisions all year long to maximize deductions and improve cash flow. At Haworth & Company, we support woman-owned businesses with year-round financial insight. Here are three smart tax strategies you should be focusing on now.

1. Optimize Deductions Through Entity Review

The structure of your business has the single biggest impact on your tax liability. While many start as a Sole Proprietorship or LLC, reviewing this structure as your revenue grows is critical to maximizing your tax savings.

For many successful woman-owned businesses, transitioning to an S-Corporation is a pivotal moment in tax planning. This allows the owner to be paid a “reasonable salary” (subject to payroll taxes) and take the remaining profits as a distribution, which is typically exempt from self-employment tax (Medicare and Social Security). The savings here can be significant as your business scales.

Actionable Steps for WBEs (Woman Business Enterprises):

• Review Your LLC Status: If you are an LLC currently taxed as a Sole Proprietorship, consult with an expert to see if electing to be taxed as an S-Corp makes financial sense for your current profit level.
• Track Home Office Expenses Accurately: If you work from home, ensure you are utilizing the simplified method or the actual expense method for home office deductions. Track utility bills, insurance costs, and mortgage interest dedicated to your workspace.

2. Leveraging Retirement Plans for Tax Shielding

One of the most powerful—and often overlooked—tax shields for small business owners is maximizing contributions to self-employed retirement plans. These plans not only secure your future but allow you to deduct substantial contributions now, immediately lowering your taxable income.

Popular Retirement Options for Small Businesses:

• SEP IRA (Simplified Employee Pension): Ideal for solo business owners or firms with few employees, offering easy administration and high annual contribution limits. You can fund this plan after year-end, giving you tax flexibility.
• Solo 401(k): Allows for contributions as both an employee and an employer, offering potentially higher total contribution limits than the SEP IRA. This is a great choice if you anticipate high profits.

We work with you to understand your cash flow and growth projections, selecting the plan that provides the biggest tax deduction today while building the most robust nest egg for your future.

3. Implement Year-Round Expense Tracking

End-of-year receipt gathering is inefficient and costly. Tax strategy for a woman-owned business should be an active, monthly process. By implementing a modern cloud-based bookkeeping system, you turn expense tracking from a chore into a strategy.

Clear, real-time data allows you to track deductible spending categories, flag irregular expenses, and predict your tax burden well before December 31st. This enables better cash flow management and prevents the stressful surprise tax bill.

Bookkeeping for Strategic Advantage:

• Consulting on Write-Offs: Understand which networking lunches, educational software subscriptions, and industry conferences qualify as legitimate business expenses. This is where an expert’s knowledge pays for itself.
• Quarterly Review: We recommend a quarterly financial check-in to project income and deductions. This allows us to adjust your estimated tax payments to avoid penalties and ensures you keep more cash in the business throughout the year.

Conclusion: Turn Financial Complexity into Financial Power

This Women in Business Month, commit to turning your financial complexity into a source of power. By proactively adopting smart strategies like entity optimization, leveraging retirement plans, and maintaining real-time books, you put yourself in control of your business’s financial destiny.

Our experienced team of CPAs and financial experts specialize in helping woman-owned businesses in Minnesota grow efficiently and confidently. We offer a full range of services designed to give you the financial clarity you need.

To see the full range of our expertise and service areas, review our specialized Who We Serve sections. For immediate assistance with core bookkeeping and financial processes, explore our Accounting Essentials services and schedule your review.