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Learning to manage business taxes effectively is essential to succeed as an entrepreneur.
Otherwise, you might get hit with an unexpectedly large tax bill. That can be enough to sink your company.
Even worse, failing to comply with tax laws can lead to legal trouble. Institutions responsible for tax collection don’t play around.
That’s why today we want to discuss how to manage taxes as a business owner!
- Which Country Should You Register Your Business in?
- How to Effectively Manage Business Taxes in the United States
- Step #1: Decide Where to Register Your Business
- Step #2: Choose a Business Structure
- Step #3: Get an EIN if You Need One
- Step #4: Get a State Tax ID If You Need One
- Step #5: Get the Required Licenses and Permits
- Step #6: Invest in Good Bookkeeping Software
- Step #7: Learn the Basics of Bookkeeping
- Step #8: Familiarize Yourself With Business Taxes
- Step #9: Hire a Good Tax Accountant!
- Is Avoiding Taxes Worth it?
Which Country Should You Register Your Business in?
If you want to start a location-independent business, consider where to base it.
The most straightforward option is to register your company in your home country, assuming that it is economically and politically stable.
However, it might make sense to shop around for the best tax rates and other perks:
- Europe: Malta, Spain, Portugal, Estonia, Norway, and other countries offer digital nomad visas designed to attract remote workers, freelancers, and entrepreneurs. This can provide an opportunity to live and travel in Europe.
- Asia: Hong Kong and Singapore have long been popular among entrepreneurs due to their appealing tax policies-something to consider if you love Asia and spend a lot of time there.
- Middle East: The United Arab Emirates offers a 0% tax rate for personal income and a 0–9% tax rate for corporate income. In recent years, many entrepreneurs have decided to register their companies there and make Dubai their home base due to low crime, a sunny climate, and an exciting social scene.
Finally, suppose you intend to pitch your business idea to investors and raise capital. In that case, you might want to register your company in the United States, even if you aren’t American.
After all, according to the “Global Startup Ecosystem Report 2024”, the #1 startup ecosystem in the world is Silicon Valley. Meanwhile, New York and London are tied for the second and third place and Los Angeles and Tel Aviv are tied for the fourth and fifth. Of the top 20 startup ecosystems in the world, nine are located in the United States!
How to Effectively Manage Business Taxes in the United States
Step #1: Decide Where to Register Your Business

All businesses in the United States are subject to federal tax laws.
However, there are also state, county, and even city taxes that you should consider when considering where to register your company.
In addition to that, you also want to research state and local laws related to your industry, including the necessary regulations, permits, and so on.
Step #2: Choose a Business Structure

The sole proprietorship is the most straightforward business structure, making it appealing to first-time entrepreneurs just starting out.
However, this structure doesn’t separate your assets from your business assets, meaning you can be held personally liable for debts, damages, and other business obligations.
That’s why we recommend registering a limited liability company (LLC) instead, even if you are a solopreneur. It will enable you to protect your assets in the case of lawsuits or bankruptcy!
Step #3: Get an EIN if You Need One
EIN stands for Employer Identification Number.
IRS has a questionnaire that can help you determine if you need an EIN and detailed instructions on applying for it.
Step #4: Get a State Tax ID if You Need One

You might need a state tax ID to pay state and local taxes. Check with the state government to learn more.
Step #5: Get the Required Licenses and Permits

You might need various federal, state, and local licenses and permits to operate your business. Make sure to research this so that you won’t miss anything!
Step #6: Invest in Good Bookkeeping Software

Regarding bookkeeping software, Freshbooks and QuickBooks are the two most popular options.
Freshbooks is arguably better for most freelancers, solopreneurs, and small business owners. If your company’s finances are simple, this app has everything you need.
QuickBooks is a better choice for businesses with complex finances due to its pricing structure, product and service range, and organizational scale. It offers various advanced features, hundreds of integrations, and 24/7 community support.
We recommend starting with Freshbooks and only moving to QuickBooks if there’s a genuine need for that because its sophistication can be overkill.
Step #7: Learn the Basics of Bookkeeping
It’s a good idea to learn the basics of bookkeeping.
Otherwise, you might record business transactions incorrectly, leading to messy books that you will either have to clean up yourself or pay someone to clean up.
Also, remember that not understanding bookkeeping makes you vulnerable to theft. If you hire a professional to keep your company’s books, you want to be able to double-check their work.
Sure, knowing the basics won’t be enough to uncover complex fraud. Still, it can help you spot inconsistencies, especially if your bookkeeper is stealing money without bothering to cover their tracks. This happens more often than you might think!
Step #8: Familiarize Yourself With Business Taxes

IRS lists five general types of business taxes:
- Income tax
- Estimated taxes
- Self-employment taxes
- Employment taxes
- Excise taxes
Which of these taxes you will have to pay will depend on various factors, including the structure of your business, the number of employees, the products and services you sell, and so on.
Step #9: Hire a Good Tax Accountant!

In theory, you could save money by filing your business taxes, but in practice, it might cost you more. How so?
It’s so easy to forget something, fill out some form incorrectly, or make a mistake. That can lead to all kinds of problems down the road, potentially even legal trouble.
That’s why we highly recommend hiring a tax accountant to prepare and file your business taxes, especially if you know you are not detail-oriented.
Depending on the business type, complexity, and size, it will cost you somewhere between a few hundred and a few thousand dollars. Think of it as an investment in your peace of mind!
Is Avoiding Taxes Worth it?
Entrepreneurs often feel they should optimize their tax strategy by exploiting tax loopholes. But is that the best use of your resources?
Our friend Alex Hormozi argues that it isn’t. After all, most of the so-called “tax avoidance” tactics are tax evasion tactics. In other words, they are illegal.
It will take you so long to sift through all the shady stuff to find something legal that works that you might as well use that time to make more money instead of simply.
In the video below, Alex shares a story of how one of his friends flew to Puerto Rico and back every weekend to get a better tax rate. That’s 102 flights per year. Pretty crazy!
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