Why Do Business Owners Reinvest Their Profits?

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
What Constitutes Profits for a Business
What Are Businesses Taxed On?
Types of Business Taxes
Income Taxes
Estimated Taxes
Self-Employment Tax
Excise and Sales Taxes
Payroll Taxes
Reducing Taxable Income
Reinvesting Business Profits Into the Business
Finding Deductions
Inventory Business property rent Startup costs Utilities Company vehicle expenses Insurance Rent and depreciation on equipment and machinery Office supplies Furniture Advertising and marketing Business entertainment Travel expenses Interest paid on all types of small business loans
Tax Audits
Investing in Employees
Choosing Purchases and Investments Wisely
Equipment It can be smart to reinvest profits into new machinery and equipment as your current assets age and become expensive to maintain. Upgrading equipment can increase efficiency and help you stay on the cutting edge of your industry.
Software Investing in software, such as payroll and accounting software, can help streamline tedious tasks and free you up to focus on more important matters, such as growing your business.
Inventory In some cases, using business profits to buy more inventory can be a smart business move. If you often sell out of popular products, for example, beefing up inventory can help you capture sales you’ve been missing out on.
More marketing You might consider hiring a marketing person or agency to help create buzz about your business, improve search rankings, and expand your customer base.
How Can a Business Be Tax Efficient?
Credit for Small-Business Health Insurance Premiums Employer Credit for Paid Family and Medical Leave Work Opportunity Credit Credit for Increasing Research Activities Disabled Access Credit Credit for Employer-Provided Childcare Facilities and Services New markets credit
The Takeaway
3 Small Business Loan Tips
Generally, it can be easier for entrepreneurs starting out to qualify for a loan from an online lender than from a traditional lender. Lantern by SoFi’s single application makes it easy to find and compare small business loan offers from multiple lenders. Traditionally, lenders like to see a business that’s at least two years old when considering a small business loan. If you need to borrow money to cover seasonal cash flow fluctuations, a business line of credit, rather than a term loan, provides the flexibility you likely need.
Frequently Asked Questions
Photo credit: iStock/Pixelimage
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About the Author
Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
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