We have a guest blogger today – Amanda from ELB Consulting. You can contact her at firstname.lastname@example.org or visit their website at elbcostseg.com.
Starting a new business is an exciting time, but it is also a time when it is critical to figure out the steps that will need to be taken in order to keep the business alive in the future. The initial start-up costs of a business are high and it may take time to begin to see a profit. This equation causes about 50 percent of businesses to fail within the first three years. If your business will be operating out of a newly acquired or constructed building, a cost segregation study may help you to avoid becoming part of this statistic.
Cost Segregation Accelerates Depreciation
Without cost segregation, most building values are listed as a lump sum amount on the business tax filing, with depreciation being calculated over the course of 27 to 39 years. A cost segregation study breaks down different components that make up the building into different classifications, allowing these components to be depreciated over a shorter period of time. These higher up front depreciation deductions during tax filing translate to lower tax obligations immediately and for several years.
May Accelerate the Break-Even Point
The most difficult time for any new business is generally the time leading up to the break-even point and many businesses never make it this far. Since a cost segregation study can help to lower the amount of taxes due, the revenues brought in during this period can go to the bottom line as opposed to being allocated to income taxes. This may accelerate the break-even point and allow your business to become profitable faster.
Can Increase Liquid Capital Available
By decreasing the taxes due for the first few years, a cost segregation study can free up liquid capital available. This can be very helpful during the first few years of operations as unexpected expenses pop up and you work towards perfecting the way that your business operates. By establishing your business in an impactful way during the early years, you may solidify the value of your business to the community in which it operates and generate a loyal customer base.
Could Allow the Business to Grow Faster
When a business becomes profitable and popular quickly, it can be conducive to growth. The additional cash flow available may help you to market in meaningful ways and expand the customer base, or may even allow you to open a second location or begin a chain. By maximizing your cash flow and profitability as early as possible, you improve the chances that your business with thrive.
To find out whether a cost segregation study could help your new business save money, contact a local business consultant or cost segregation expert today!