Writing that title made me a little nauseous, sick, and creeped out all at once.

Truth is, there’s no love lost between me and any tax collection agency.  I’m not shy about the fact that I think we as a country and people are over-taxed, and small businesses are at a huge disadvantage in their tax situation.

But there is one reason I like taxes.  One simple, green reason.

Paying taxes means you’re making a profit. 

You’ve heard the saying, “Where there’s smoke, there’s fire,” right?  It’s the same way with taxes.  Where there’s taxes, there’s profit.  And that’s your goal in business.  Not to pay more taxes (lol), but to make more profit.

I’m a fan and advocate of avoiding as much tax liability as you legally can; I think that’s being a good manager of what you’re given.

In a startup business, as soon as you start to turn a profit, you see that in your books.  Four out of five people will tell you that you need to get that profit down so you don’t owe any taxes!  Buy some stuff at the end of the year, make investments, spend that money so you don’t have to give it to the government!

If you need to buy something for your business, make an equipment, systems, or software investment, I’m all for that.  But don’t spend money at the end of the year just to avoid taxes; you’ll lose every time!

Let’s say you ended the year with $10,000 in profit.  A 30% tax rate would cost you $3,000 in taxes.  After taxes, you would take $7,000 home with you.  To avoid that tax bill, you’d have to spend the entire $10,000 on legitimate business expenses/investments, and take none of it home with you.  Instead of paying the tax bill of $3,000, you choose to spend the $10,000!  You’d be better off paying the tax bill and keeping the $7,000 for yourself!

So, entrepreneurs, groan and hold your nose every quarter when taxes are due.  But take heart, because paying taxes means your doing something well.  You’re winning.