May 18, 2012

Save or Spend? Creative Ways to Invest Your Small-Business Tax Return

[caption id="attachment_393" align="alignright" width="300" caption="Creative Ways to Invest Your Small-Business Tax Return"]

[/caption] Whether it’s your small-business tax return or an unexpected bonus from a client, it can be difficult to decide whether to save or spend extra revenue. Conservative business owners might tell you to invest in a contingency fund. After all, in springtime, you may get more than your fair share of rainy days. But, while your accountant is advising you to save for emergencies, your acumen is telling you to spend for the future. With so many ideas spinning round and round, small-business owners can experience confusion when deciding what to do with their tax return. So, let's take a look at the following investments. Each idea offers a way that small-business owners can detangle both thoughts and finances to make full use of spare cash. Who says business spending can’t be fruitful and fun? 1. Invest in human capital — you! Small-business owners, as opposed to CEOs of large corporations, have disparate education levels. From dry cleaners to vendors to venture capitalists, human capital makes up a large portion of small-business assets. Now is the time to invest in you. And, you won’t be alone. Entrepreneur Magazine reports that more and more small-business owners are headed back to campus. “Usually, it's because they have a found a gap in their background that's troubling them,” explained Tom Kinnear, managing director of the Zell Lurie Institute for Entrepreneur Studies within the University of Michigan's Ross School of Business¹. “I felt like something was missing—that getting an MBA might be a good thing to do,” explained Verdi Ergn to Entrepreneur¹. Ergn is a first-year MBA candidate at Ross who, after selling two successful food service ventures he started as an undergraduate, recently launched Own, a point-of-sale cashiering system. “There's a lot out there that I don't know.” You don’t have to invest in a new degree to obtain new small-business tools, however. With a flexible schedule and a sudden influx of cash, small-business owners can take a class or two in an area of interest. Any additional know-how could help increase productivity and profitability within your company. 2. Invest in assets for your business. Occasionally, it’s hard to discern which purchases are necessary and which are luxury items. Now that your small business has a few extra bucks, buy that new computer, factory-size sewing machine, or whatever other asset you need (or want) to run your business. You’ll be pleased to know that next tax season, you can itemize your small-business deductions and should be able to write-off your new purchase. Not sure what to buy? Browse irs.gov for acceptable deductions and get properly inspired. Or, if you jumped the expenditure gun, simply pay-off credit card debt from a big purchase last fiscal year. 3. Invest in risky business. Have an eye for trends, but never the funds to take advantage? Small-business owners possess the business sense to invest in stocks. In a small shop filled with family and friend employees, however, small-business owners can feel compelled to play it safe. With the right attitude, accountant, and newfound affluence, now you can try your hand at the market’s ups and downs. If you can handle the risk and the mental challenge of short-term fluctuation, stocks are a fun and potentially lucrative investment for small businesses, where even minor revenue makes a big difference. 4. Invest in green. You made some green, so why not invest in it? The environment, that is. If your small-business tax return or bonus check is large enough to foot the bill for solar panels or energy-efficient appliances, a short-term investment may yield long-term savings. Solar electric systems and water heaters come with a 30 percent tax credit, according to Energy Star². Not to mention the energy cost savings for your company and the intrinsic benefits to the world around you. Additionally, the terms “organic” and “energy efficiency” are no longer fads, they’re fantastic marketing devices. 5. Invest in good credit. In all fairness, this last idea is neither creative nor fun; but it’s financially sound. Good credit can lead to lower interest rates on credit cards or hard-to-get small-business loans (which are easier to get with us at The Small Business Authority). If you have the funds to pay off short-term debt, small-business owners should consider this option first. Allocating disposable income to a savings account or high credit score may not seem glamorous or fashionable, but it is, in the least, indispensible to small-business survival. For more information, visit: 1. Entrepreneur: Why Business Owners Are Heading Back to Campus 2. Energy Star: Federal Tax Credits for Consumer Energy Efficiency