Running a small business comes with its own set of challenges. These challenges include business operations, staying competitive yet relevant, monetizing your product and/or services is hectic.
However, one of the most proactive and sometimes burdensome responsibilities a small business owner will encounter is tax compliance.
There are thousands of steps involved in tax compliance. With quarterly tax filings and IRS compliance requirements, there are infinite tasks involved.
For a small entrepreneur operating from a basement or an affluent LLC that has employees and is growing, the financial landscape for every entrepreneur is strewn with legal landmines.
Finding the best tax attorney for small business is not simply advantageous; it is a necessity.
In this useful guide, we will discuss how to find the best tax attorney for your small business, what services a tax lawyer offers, what you might expect to pay for legal assistance, and more importantly why it is better to pay for legal assistance up-front than it is to potentially deal with a business tax issue later that could lead to financial ruin.
Why Your Business Needs a Tax Attorney & Not Just a CPA?
Many small businesses use a CPA or sometimes a bookkeeper for tax purposes. A CPA is a great asset for obtaining and preparing your taxes along with your accounting, but a CPA does not have the training or licensure to represent your business in front of the Courts or defend it during an IRS investigation.
A small business tax lawyer has a legal license and can provide legal advice and defense in situations that a CPA cannot.
If your business receives an IRS notice, is in audit, or is facing wage garnishment or tax liens, a small business tax attorney for LLCs or Corporations can act right away to protect your rights.
A small business tax lawyer can also help you structure your business to reduce liability and avoid problems down the road.
What a Tax Attorney for Business Owners Can Do?
The best tax attorney for small business is much more than someone you call for tax season. The best legal support for small business taxes:
- Tax planning for growth: Structuring operations in a way that minimizes taxes owed
- IRS defense: Representation of your business during audits or investigations
- Entity formation and restructuring: Legal advice for LLCs, S corporations, C corporations
- Payroll and employment tax compliance
- Sales tax and nexus issues for sellers online or multi-state businesses
- Back taxes, Offers in Compromise with the IRS
- Mergers, acquisitions, and exit planning with a focus on tax ramifications
If your business is growing or dealing with other complicated financial issues, engaging a startup tax attorney will save you money by avoiding potential blunders.
Common IRS Problems for Small Businesses
Even when someone is acting in good faith, the IRS almost always penalizes mistakes that are mere accident. Here are some of the common mistakes faced by small businesses:
- Late or missed payroll tax payments
- Finding out which contractors are classified vs. employees
- Not filing a corporate return or estimated tax payment
- Improper business expense deductions
- Sales tax issues caused by doing business across state lines
- Missing a deadline or ignoring an IRS request for documents
If one finds themselves stuck in a situation like these, a business tax compliance lawyer can assist in bringing resolution to the matter and help limit penalties and even maintain your legal standing.
Choosing the Best Tax Attorney for Small Businesses
How will you pick the best tax attorney for small businesses? Always start with experience. You do not want just a tax lawyer, you want someone that regularly represents business owners along with LLCs and corporations, and has practical experience with the tax code for businesses like yours.
Look for an attorney that offers:
- Substantial experience in small business tax law
- IRS representation credentials (EA, CPA with legal support, or tax court bar admission)
- Transparent fee agreements (hourly, flat, or hybrid)
- Responsive and continued communication
- Strategic tax planning, not just reactive assistance
If your company is in an audit, ensure you are working with a small business IRS audit tax attorney who has experience defending small-business audits.
Tax Attorneys for LLCs vs. Corporations
An LLC’s legal needs are different than those of corporations. An LLC tax attorney may work with pass-through taxation, partnership agreements, and issues related to income distributions.
A corporate tax attorney for start-ups will address stock issuance, equity compensation, and corporate compliance.
For an LLC, the tax issues include:
- Tax classification (sole proprietorship, partnership, S Corp)
- Member Agreements and distributions
- Self-employment tax planning
For corporations, tax issues include:
- Mitigation of double taxation
- Shareholder taxation
- Corporate governance & IRS compliance
By working with the right type of corporate tax attorney for startups your business will be structured for profitability while being fully compliant with tax law.
When to Hire a Tax Lawyer for Business Owners
It is wise to contact a tax attorney before something bad happens. Most business owners receive a tax notice from the IRS and then look for assistance, but the best time to engage legal representation is:
- at the formation or restructuring of the business
- during an expansion, acquisition, or major investment
- before a tax year that will have a great difference in earning or deductions
- when you receive any communication from the IRS that you do not fully understand to make that communication clear
- there is tax issue, and you believe it is improper or incorrect, but you do not know how or if you are able to rectify it
Proactivity with legal representation will always be cheaper and better than dealing with a crisis.
What It Costs to Hire a Small Business Tax Lawyer?
Legal expenses can vary significantly depending on the type of case, the size of the firm, and its location. Here is a wide range of costs associated with retaining affordable tax attorney for businesses:
- Hourly Rates: $250-$500/hour
- Flat Fees: $1,500 to $5,000+ for typical business filings, audit defense, or compliance assistance.
- Retainers: $2,500 for ongoing business counsel, for longer engagements, or initial multi-month projects.
Although the costs associated with retaining a tax attorney may seem high for small businesses, they typically save your business money by avoiding tax penalties, tax liabilities, and possible escalating IRS activities.
If a tax attorney can save your business more money (or headaches) that outweighs their fee, then it is a worthwhile investment.
Do Affordable Tax Attorney for Businesses Exists?
The term “affordable tax attorney for businesses” seems like an oxymoron; however, affordable legal assistance is available. Many attorneys are willing to provide payment plans or flat-fee services.
Bar associations or business incubators in your area will likely refer a vetted, corporate tax attorney for startups and small business owners.
In addition, several Low-Income Taxpayer Clinics (LITCs) provide free or low-cost assistance to small business owners with limited income who have been audited or contacted by the IRS.
In the end, compare rates, obtain written fee agreements, make sure you not just getting any tax service, but a true legal tax expert.
Final Thoughts
Whether you are operating a family-run shop, managing a multi-state LLC, or launching a tech-based startup, business tax law is too complex to leave to chance.
For small business owners, the best tax attorney is someone who views you as a partner for your strategic planning for the financial health of your business.
Don’t just call the best tax attorney for small business owners when things go wrong; incorporate them into your planning long-term to save money, decrease your liability, and build a better business.
So, if you are not clear whether your current structure is compliant or want to scale, you should engage legal counsel.
The best tax attorney for small businesses is not just someone who will keep you out of trouble, but a partner that helps you scale in the right way, and therefore, is beneficial for all businesses.