Investing extra cash back into your business is the smartest way you can save on your taxes, but how exactly should you invest your cash?
We asked six successful entrepreneurs from Young Entrepreneur Council (YEC) the following question:
Q. What's one way I can invest my business's extra cash this year to reduce its tax basis?
1. New business equipment
Are your employees using outdated desktop computers? Is your office in desperate need of faster print speeds and better quality printing? One of the best ways to use extra cash to reduce your tax basis is to invest in legitimate expenses, such as replacing outdated equipment. Note that you'll have to depreciate the equipment, but you'll get immediate tax benefits. —Obinna Ekezie, Wakanow.com
2. Retirement
Retirement is rarely focused on enough. Any extra cash your business has should be put into vehicles that help you reduce your tax basis and be more prepared for retirement, no matter how far off it is. —Cynthia Johnson, Ipseity Media
3. Personal development and special marketing projects
We use a portion of our profit to invest in the personal development of our leadership team and simultaneously engage in a somewhat risky, crazy, marketing idea. Last year we sent our president to the Stagen Leadership Academy in Dallas and hired Early Light Media—founded by Emmy award-winning filmmakers—to shoot a documentary about what we learned. Both are paying off big. —Corey Blake, Round Table Companies
4. Your business
Great companies like Salesforce and Amazon invest all their extra cash into business activities (i.e., sales, marketing, research and development) to fuel future growth. Hence, they never show profits. This not only helps you save taxes, but increases your shareholder value, provided that the money is spent on activities that lead to business growth. —Karan Chaudhry, Comnplus
5. Your employees
Splurge on your employees and thank them for their hard work throughout the year. Give out gift cards, cash, or personal presents that appeal to them individually. You can also thank vendors and freelancers with special gifts. —Peter Daisyme, Invoicing
6. Community reputation
If you're a business that operates at a local scale, donating to charity and participating in local organizations throughout the year are great ways to do good deeds while raising your profile in the community. You'd be surprised at the opportunities this can open up, as those who head city-level charities are often local business and political leaders. - Matt Doyle, Excel Builders
