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E-Myth – “Why most small businesses don’t work & what to do about it”

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Part-time CFO | Can Entrepreneurs Improve Cash Flow Using Dividends

One of the most significant challenges that entrepreneurs will face in business today says part-time CFO, is running out of money in their business. The reason why this is so big, is out of all entrepreneurs that start businesses, have them will close their business within five years. 29% of those entrepreneurs who have failed their business, will go on to say that the reason why their business failed was because they ran out of cash. Business owners should use efficient tax planning strategies to help themselves avoid running out of money in their business. By understanding how to pay themselves in salary, dividends or combination of the two, entrepreneurs can create strategy that will allow them to save thousands of dollars every year on taxes, and therefore improve the cash flow in their business.

The reason why the decision on how to pay themselves works out to be tax strategy is because however a business owner takes out money in their business, they have to pay taxes on it. If they take out income as a salary, they pay one tax rate, if they pay dividends, they are paying other tax rate. Part time CFO says that based on their circumstances as well as through the process of the business, by utilizing a mix of the two methods, business owners can avoid paying certain amount of taxes, that can help increase the cash flow in their business.

The way that a business owner can come to this conclusion, can only be done by utilizing a part-time CFO who is well-versed in tax strategies. If an entrepreneur appears from someone that I their answers the question very simply, are very quickly without completely understanding the business owners unique situation and their business, chances are they are not truly understanding it deeply enough in order to answer that question good enough.

If business owners try to save money by hiring a good part time CFO. If entrepreneurs try to save money by hiring accounting services based on price, the amount that they end up saving on accounting, they will more than pay double on in last tax opportunities. Itís extremely important that business owners ensure that they are preparing the best accounting services that they can, in order to maximize the amount of tax savings that they can.

If business owners think that they can figure this information out themselves, and therefore pay themselves either hundred percent dividends or hundred percent salary, they are probably not getting the most efficient tax savings that they can. The reason why this is so important, is the more money that a business owner can save in taxes, the more they can impact their cash flow in their business, they can help them avoid one of the top three reasons that entrepreneurs go out of business. Business owners should consult their part-time CFO, and create an efficient tax strategy that can help them increase their wealth and increase tax flow in their business.

Many entrepreneurs donít understand the differences between taking out salary or dividends when they need to start taking money out of their business says part-time CFO. Many donít understand the difference between the two, or how they can utilize those two different methods in order to save thousands of dollars a year in taxes. Not only can saving significant amounts of money in taxes, that business owners also can use the taxes that they save to help increase their wealth so that they can positively impact their future as well.

The first thing that business owners should understand is the difference between salary and dividends. There are ways for entrepreneurs to take money out of their business, but the two are taxed at very different rates. Salary is deductible from the income of the corporation, and is taxed at of a maximum of 48% in personal taxes. Dividends on the other hand says part time CFO are not deductible from income at all, they are over withdrawal of the prophets of the corporation and will not show up on the income statement of the business. Dividends are taxed at a 11% small business tax rate. Many entrepreneurs think that since dividends are taxed lower, that they should only take dividends or their corporation, but itís a much more complicated equation than that.

In order to figure out this equation, business owners need to consult with an expert in tax strategies such as a part-time CFO. These tax professionals have spent four years on their undergrad degree, through years articling and then several more years gain experience in the field in order to do what they can do efficiently. Business owners need to first of all contacts a tax professional who they are going to enjoy working with, and not necessarily the least expensive one. If they hire someone based on cost alone, they often end up that they will get less than stellar accounting services, and what they will receive in terrible service will cost them way more in taxes than it would and accounting fees had they hired a great accountant in the first place.

Not only is it important to hire someone who is good at what they do, business owners need to hire a part-time CFO who will be able to ask all of the right questions. This complicated equation need someone who is willing to take the time to learn about the business as well as the business owner in order to figure out what the proper mix of salary and dividends is.

Once an entrepreneur has hired the right professional to help them, they will be able to figure out what the best makes is for taking money out of their business, that can help them pay the least amount of taxes possible, that can impact their business in terms of cash flow, it also impacts their lives in the amount of money that they will be able to save for their future.